Turkey Reduces Government Borrowing Target Amid Market Rout

(Bloomberg) — Turkey said it would borrow less than originally planned to narrow the budget gap in the medium term, leading the embattled lira to trim losses.

The domestic debt rollover ratio will be 104 percent at the end of the year, down from an earlier forecast of 110 percent, the Treasury and Finance Ministry said in a written statement. Lower spending and increased revenues will bag the government around 35 billion liras ($6.5 billion) during the rest of the year, helping the budget to run a surplus of around 5 billion liras when payments on interest are excluded.

The statement is the first from top policy makers on measures to fix the economy’s vulnerabilities since the most recent market rout was triggered by last week’s U.S. sanctions. The penalties on two ministers in President Recep Tayyip Erdogan’s government were imposed over Turkey’s continued detention of an American pastor.

Treasury and Finance Minister Berat Albayrak will elaborate on details of his new economic program in a briefing on Friday.

Read more on Erdogan’s roadmap out of market meltdown: Erdogan’s Road Map Out of Market Meltdown Is Full of U-Turns (2)

The lira erased some of its losses within minutes of the statement. It had weakened 1.9 percent to 5.3811 per dollar at 1:21 p.m. in Istanbul. The currency lost about 9 percent since the U.S. sanctions were announced.

Below are some of the highlights of the statement:

• Budget gap will be less than 2 percent of economic output this year, in line with previous estimates, and will be capped at 1.5 of GDP in the medium term
• Ratio of current-account deficit to the economy will stabilize at 4 percent during the same period
• 2019 GDP growth seen at 3 percent to 4 percent
• Inflation will be lowered to single-digit levels as soon as possible
• Turkey’s banks and non-financial companies face no foreign exchange or liquidity risk

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