A Private Debt Story: Republic of Turkey Hires McKinsey & Company

The AKP then signed another three-year standby agreement for a $10 billion loan in May 2005 to continue the programme, although deviations started to occur thereafter. Since May 2008, Turkey has not signed any agreement with the IMF, and the AKP paid the last instalment of the IMF loans in 2013, paying a total of $23.5 billion over a decade. Since this has been a matter of pride, and an election as well as propaganda tool for Erdogan, it is highly unlikely that he would be willing to go to the IMF before the upcoming local elections in March 2019, even if the ongoing currency crisis evolves into a full-blown financial crisis before that. The AKP cannot go to the IMF until March 2019 (unless Erdogan calls for an early election or suspends elections forever), given the almost no credibility that it is left with at the moment. [...]this move has been to gain some credibility in the implementation of the New Economic Programme (NEP) announced on 20 September 2018 and to meet the expectations of the creditors to whom Turkey owes about $467 billion. What leads to private debt build-up in any country implementing such reforms is always the austerity component, not to mention the privatisation of public assets because that happens on private debt. Since money is debt and austerity pushes the government to borrow less and less, unless some financial crisis occurs and private debts become public, the onus of increasing the money supply for enhancing "competitiveness and growth" falls on the shoulders of households and non-financial firms by borrowing more and more.