Turkey to increase capital for credit guarantee fund to 100 billion liras

Turkey’s government plans to increase a cap on the amount of capital that can be transferred by the Treasury and Finance Ministry to the country’s Credit Guarantee Fund (KGF) to 100 billion liras ($5.76 billion), the Dünya newspaper reported on Thursday.

The upper limit will be increased from 60 billion liras, Dünya said, citing sources from the ruling Justice and Development Party (AKP). The measure will be taken in a package of economy-focused legislation that the government plans to present to parliament, it said.

The government has sought to stimulate economic growth over the past few years by expanding the KGF, which helps to provide cheap loans to businesses through the credit guarantees. Turkey’s central bank, under pressure from the government, has kept its benchmark interest rate well below inflation to help facilitate the cheap borrowing. Banks may use funds set aside by the KGF in the event that firms fail to repay their debts.

Investors in Turkey are calling on the government to return to orthodox economic policies including interest rate hikes to help bring down inflation of 73.5 percent and to arrest a slump in the lira, which has lost almost a quarter of its value against the dollar this year after declines of 44 percent in 2021.

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