Turkey will ease restrictions on local banks' foreign currency lending, Ali Babacan, the economy minister, said on Monday. The move would remove a distortion that artificially inflated the country's external debt and made it harder for companies to borrow.

The new rules will allow Turkish banks to extend foreign currency-denominated loans of at least $5m and one year's duration to companies that have no foreign currency revenues. Before, foreign currency lending was permitted only to companies with foreign currency earnings. Bankers in Istanbul had long complained the rules gave international rivals an unfair advantage and forced Turkish banks to channel loans through offshore branches.

Babacan said borrowing from offshore branches accounted for $35bn of the private sector's $139bn total external debt stock at the end of 2008.

17 June 2009