Erdogan bid to boost economic growth two months before polls
Turkey is speeding up its plan to inject capital totaling $5.5 billion into major state banks in a bid to boost lending again ahead of May elections. It is the latest attempt by Turkish President Recep Tayyip Erdogan to boost economic growth less than two months before the May 14 election, which is expected to be his biggest test in his 20 years at the helm of Turkey.< /p>
The capital strengthening of the state-owned banks will be undertaken by the country's sovereign investment fund by granting TC Ziraat Bankasi As 40 billion Turkish lira, an amount equivalent to $2.1 billion, and from 30 billion Turkish lira, an amount equivalent to 1, $5 billion, to each of Turkiye Vakiflar Bankasi TAO and Turkiye Halk Bankasi AS. It should be noted that the sovereign wealth fund fully controls Ziraat, while it has majority stakes in the other two banks. The news sent bank shares higher, with Vakifbank gaining 4% and Halkbank jumping 6.9%. The banking index on the Istanbul stock exchange gained 0.4%. As Xan Oksun, a trader at Global Securities, comments, “the news that a new round of capital injections to state-owned banks is imminent caused the market to react positively.” In addition, the sovereign wealth fund will provide another 4.5 billion Turkish lira, equivalent to $237 million, to Ziraat's Islamic banking unit, Ziraat Katilim.
Erdogan's standing policy is to stimulating the economy through cheap borrowing. However, the devastating earthquake that hit the country last month is forcing Turkish banks to prioritize lending to affected areas. State-owned banks, after all, usually offer loans with better terms and lower interest rates compared to private banks. The devaluation of the Turkish lira, however, has eroded their capital base forcing the government to provide them with capital for the fourth time since 2019. The sovereign wealth fund provided capital to the state-owned banks in three separate periods in 2019, 2020 and 2022.
