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Borrowing by local Turkish authorities is expected to surge to a historically high level this year amid a lack of tight national regulation of municipal borrowing and increased need for infrastructure investments, a Standard and Poor’s (SandP) report revealed on Tuesday. Turkish municipalities’ borrowing will increase by 16 percent to return to their historic high of 19 billion euros — a level first reached in 2013, the SandP said on Tuesday, adding th

Borrowing by local Turkish authorities is expected to surge to a historically high level this year amid a lack of tight national regulation of municipal borrowing and increased need for infrastructure investments, a Standard and Poorand#39s (SP) report revealed on Tuesday.

Turkish municipalitiesand#39 borrowing will increase by 16 percent to return to their historic high of 19 billion euros — a level first reached in 2013, the SP said on Tuesday, adding that Turkey will remain among four countries to lead municipal borrowing in its geographic region.

andldquoConversely, tighter national regulation of municipal borrowing will deter municipal debt accumulation in Croatia and Slovakia,andrdquo it added.

Most municipalities currently being governed by mayors from the ruling Justice and Development Party (AK Party) generally avoid being audited by the Turkish Court of Accounts. Audits of the AK party-run municipalities have allegedly been crippled by the government, which opposition parties had warned of being part of the governmentand#39s efforts to limit all public auditing mechanisms at work to be carried out by public institutions, thereby paving the way for corruption.

Experts have voiced concerns that the number of cases of corruption at municipalities throughout Turkey may increase.

Following a change in the law regulating the Court of Accounts at the end of 2010, the court had been given responsibility for auditing municipality-owned companies, which manage huge budgets.

But such audits have remained limited.

By March of last year, the Kocaeli Municipality, one of the AK Partyand#39s largest, was ranked the most indebted municipality with debts of TL 542 billion.

Kocaeli Mayor Ibrahim KaraosmanoIlu, who was elected from the AK Party in the 2009 local elections, carries the title of the mayor with the largest debt in Turkey. Melih Gandoumlkandccedilek, who has been Ankaraand#39s mayor for more than two decades, is a controversial figure for criticism over his unpaid debts to the Atatanduumlrk Forestry Farm (AOandCcedil) for rent revenues and to the state-owned Turkish Pipeline Corporation (BOTAI).

The report cited fast growth and increasing infrastructure needs for the local authorities in the Central and Eastern Europe (CEE) region borrowing more than in recent years. Municipalities in the CEE region receive smaller budget revenues on average than their peers in Western Europe, the SP report said, adding: andldquoThese circumstances create conditions for debt accumulation which is, however, constrained by regulation of municipal borrowing and management capacity to implement complex infrastructure projects.

andrdquo

h2Local borrowing to hit 7 billion euros in CEEh2 The SP report says borrowing by local and regional governments in the CEE region is likely to exceed 7 billion euros in 2015, a 12 percent increase compared with 2014. It adds that local borrowing in the Czech Republic, Poland, Romania and Turkey will account for 84 percent of municipal debt in the region.

andldquoWe assume that the city of Bucharest and Turkish municipalities will drive the acceleration of municipal borrowing in 2015. andhellip We are also counting on an acceleration of municipal borrowing in Turkey.

We believe that the central government will encourage Turkish municipalities to raise the public investments needed to support economic growth in the country,andrdquo the report said.

Based on a comprehensive survey of municipal debt in 16 regional countries, Tuesdayand#39s SP report says local and regional governments in the Czech Republic, Poland, Romania and Turkey continue to dominate municipal debt issuance in the CEE region this year Projected acceleration of non-EU investments in Latvia, Turkey and Serbia, refinancing of accumulated payables in Montenegro and delays in implementation of EU-sponsored projects in Bulgaria, will drive municipal borrowing in these countries, the report said.

andldquoChanges in the levels of municipal debt in individual countries will vary depending on a combination of constraints imposed by national legislation on municipal borrowing, the adequacy of local authoritiesand#39 own revenues to cover infrastructure shortcomings, and the availability of external financial aid,andrdquo the report added.

SOURCE: Today’s Zaman