CONFIDENTIAL
xxi
cautious borrower and it is most unlikely that it would wish to over-extend
itself. At end-1987 it already had some $4.2 bn of undisbursed credits with
BIS-area reporting banks (up $1 bn on end-1986). It is probable that the proposed
In any
£1 bn UK facility (which is still a long way from finalisation) is larger than could
be utilised in the near future. Similarly, there are indications that drawings
under the contracts already signed with the FRG are likely to be quite low. From
the UK prudential angle, concerns that British banks might risk over-exposing
themselves are misplaced since the lending would be 85%-guaranteed by ECGD.
event Soviet creditworthiness remains sound, foreign trade is a very small part of
the total Soviet economy and their debt service ratio is moderate (25% at
end-1987). Current account developments will be monitored closely, however, given
the slump in world oil prices.
Turkey
71
There is increasing concern at the direction the economy is taking. Inflation
has now reached 86% and, with Ozal apparently still preoccupied with next March's
local elections, the 1989 budget looks complacently optimistic. Although the
current account is performing well this year, the deficit in the first eight months
was only $131 mn (cf $502 mn in January-August 1987), and the 1988 foreign
borrowing. programme is said to have already been completed satisfactorily, some
OECD officials fear a rescheduling and/or Fund programme may be necessary by late
1989. Other voices have also been calling for an SBA but Ozal has vehemently
denied the need for a Fund programme. A high-level mission visited Washington in
mid-November to seek to reassure Fund/World Bank staff and a Fund mission later went
to Ankara to continue the dialogue.
Greece
72 Shaken by the Koskotas financial scandal, and with elections due to be held by
June 1989, the will of the Pasok Government to stabilise the economy is weaker than
ever. Failure to keep to the tight conditions outlined in 1985 has created
problems with both inflation and the PSBR.
73
The current account deficit for this year is projected to widen to $1.5 bn from
$1.3 bn in 1987. However, non-debt creating capital inflows remain strong enough.
to ensure the financing of the deficit without recourse to net new external
I borrowing. Debt service costs, however, are estimated to rise by 31% next year and