Citibank has been asked by the Treasury to sound out the international markets for a one-year, syndicated loan valued at $200 million-250 million for the Soil Products Office (TMO), the state grains board, Istanbul banking sources say. An all-in price of about 130-140 basis points over the London interbank offered rate (Libor) is being considered for the deal, the sources add.

Citibank arranged a $250 million loan in August 1995 for the grains board at an all-in cost of 125 basis points over Libor, the sources added. The banking sources said the increased pricing for the present deal reflected market concerns about the economy and the political and economic policies of the Islamist-led coalition government.

The TMO every year regularly borrows abroad to help finance its domestic grain purchases. But the grains board was forced to import about 400,000 tonnes of wheat after the 1995 harvest, when scarcities of good quality milling wheat due to a pestdamaged crop caused hoarding and speculation, raising domestic market prices above the TMO’s low support levels.

However, the 1996 wheat harvest is expected to be good, totalling about 16 million-16.5 million tonnes compared with 15.5 million tonnes a year previously, Ankarabased Western experts say. The TMO so far in 1996 had paid farmers with funds left over from the 1995 facility, according to TMO general manager Ismail Agan, cited by the semi-official Anatolian news agency on 19 August. The grains board still owed another TL 10 million million ($116 million) in payments, he added.