Sustainability of external debt and the model of Turkey

Nowadays, common problem of many developing countries which include Turkey isobligatory apply to external debt because of insufficiency of domestic capital in the finance ofdevelopment and increase in the balance of payments deficits.The issue of external debt sustainability has gained importance by the effect of hugeamount of increase in using external debt in 1980?s, a few developed countries? prolongedbalance of payments deficits and the debt crisis of developing countries. For an indebtedcountry being solvent means that the external debt and external debt policies are sustainable.The stationary of the ratio of external debt stock to national product in the long run shows thatthe country is solvent. When Turkish economy is taken into consideration it is seen that; it hashigh debt stocks, the need of external debt continues by increasing and the external debtindicators give rise to the anxieties about the issue of external debt sustainability.The aim of this study is to investigate if the Turkish external debt is stil sustainable.The sustainability of the Turkish external debt is analyzed by employing the unit root testingand the time series econometrics with ARIMA model. Country risk approximation is used forto analyze if Turkey?s external debt sustainable or not. Total external debt, gross nationalproduct and export annual datas between 1964-2005 are used in this study. By using ARIMAmodel, next five year?s total external debt, gross national product and export values areestimated. According to external debt indicators, which are obtained from estimated values,sustainability condition of Turkey?s external debt is apprised.The empirical findings, reached from the study, show that; Turkey is over the riskborder which World Bank indicates and as being heavily indebted country, it is confrontedwith the risk of unsustainability of its external debt.Keywords: Foreign Debt, Sustainability, Foreign Debt Indicators, Country Risk,ARIMA.