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Turkey’s banks in better shape, but external risks still high

Turkey’s banking sector has been one of the weak links in the EM world in recent years due to its very high external debt burden. The good news is that banks have paid down these external debts and built up their FX liquidity buffers since 2018. This has reduced some banking vulnerabilities, but the economy is still highly reliant on external financing which leaves it vulnerable to a souring in global risk appetite.

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