March 1, 2019 / 9:37 AM / 7 months ago

UPDATE 2-Turkey to offer SMEs a second 25 billion-lira loan package

(Adds analyst comment)

By Daren Butler and Ali Kucukgocmen

ISTANBUL, March 1 (Reuters) - Turkey will offer small- and medium-size enterprises a second loan package totalling 25 billion lira ($4.67 billion), the finance minister said on Friday, as the government tries to boost flagging economic activity.

Seventeen banks are participating in the package, Berat Albayrak said, adding that 20 billion lira of the package would be backed by the treasury.

The loans will have a maturity of 36 months and allow six months without principle repayments, the Turkish Banking Association said. The monthly interest rate will be 1.54 percent and the annual rate 18.48 percent, the association said. The loans will be available from next week, it said.

Turkey rolled out a similar package in January, with 13 banks participating. The banking association said on Friday that package provided 25 billion lira to SMEs.

The government hopes to reinvigorate the economy after a currency crisis last year slowed its growth to 1.6 percent in the third quarter and pushed annual inflation above 20 percent.

Markets may interpret the move as a government attempt to boost growth before elections on March 31 rather than focusing on long-term measures, said Piotr Matys, emerging markets forex strategist at Rabobank.

“This could prove a risky move at a time when the market has been so far disappointed with lack of progress on structural reforms that would build a strong foundation for well-balanced and sustainable growth over the long-term horizon,” he said.

The lira lost nearly 30 percent last year amid concern over the central bank’s independence as President Tayyip Erdogan pushed it to cut borrowing costs.

The crisis also raised worries over the state of the country’s banks, which saw an increase in non-performing loan ratios and a slowdown in loan growth.

Moody’s said recent measures by Turkey to increase loan growth at state banks threaten the credit of the banks.

$1 = 5.3570 liras Additional reporting by Nevzat Devranoglu; editing by Larry King

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