The Problem of Turkey's foreign debt and the effects of foreign debt on Turkish economy

SUMMARY As a developing country, Turkey's foreign debt stems from Ottoman Empire Turkey took responsibility of sixty-five millions foreign debt from Ottoman Empire at begining of the establishment of the Republic. During the nationalization policies, first time Turkey borrowed some foreign money to nationalize foreign owned corporation in Turkey. Then Turkey declareted a moreterium in 1958. Even Turkey had attempted to sustain her development without borrowing from outside for the second five years planned period, she was not able to succes it. As a result of 1974 and 1978 crude-oil shocks in the world. In 1979, Turkey escaped a declaration of another moreterium by postponing her repayments inadequate domestic saving, balance of payments deficits, inefficient source uses, collaption and interest payments take places Turkey fell in a debt debate Turkey has started to pay her debt by reborrowing recently. In this study, the influences of the borrowing from outside on Turkish economy is analyzed by the ratios, which show the borrowing positions of the wuntries, for the period of 1980 and 2000, the last two decade of the century and milenium. As a result of the evaluation of those ratios, Turkey is categorizied in the heavily-debted countries, and the persistently outstanding foreign debt has worsened Turkish economy since 1980. In order to reduce foreign debt and to overcome economic crises, Turkey priorily must design taxes efficiently, consume resources and credits productively, stop corruptions and wastefullness, to make privatisation of the state economic enterprises after making them profitable. Howewer she must reduce the borrowing at high interest especially domestic borrowing, and look for long-term foreign borrowing at lower interest importantly, Turkey should continue her export - oriented industrialization policies, for that, Turkey may subsidize export products and free the domestic currency to compute outside. rx