Turkey Unveils Draft Details of Planned Sovereign Wealth Fund

  • Draft law orders foundation of Turkey Wealth Fund TVF
  • Fund to be financed with income from sale of state assets

Turkey’s government took the first steps toward creating a sovereign wealth fund that officials say can be used to stabilize markets and fund infrastructure projects in the wake of a failed coup attempt.

Prime Minister Binali Yildirim sent a bill on the fund to parliament after his cabinet’s approval, according to a copy of the draft obtained by Bloomberg on Tuesday. The proposal allows the government to establish a wealth management company called Turkiye Varlik Yonetimi AS with a capital injection of 50 million liras ($17 million), to be financed from the state Privatization Fund. That company would create another entity, Turkiye Varlik Fonu, or Turkey Wealth Fund TVF, and other funds as it sees necessary, according to the draft.

While the draft didn’t include details on how the fund would be utilized, Yildirim told Bloomberg in a July 24 interview that it would have “tens of billions of dollars” at its disposal but wouldn’t threaten the country’s budget deficit. In another interview with Bloomberg, Finance Minister Naci Agbal said on July 28 that the fund might also be used to stabilize markets by buying Turkish assets if needed.

The plans come as Turkey has been trying to reassure investors and calm markets after a failed military putsch on July 15, which the government blames on followers of U.S.-based cleric Fethullah Gulen. Customs and Trade Minister Bulent Tufenkci said the economic damage from the attempt may be about 300 billion liras ($100 billion), according to Hurriyet newspaper.

The finances for the fund will be provided from the government’s asset sales program, cash surpluses from the state Privatization Fund and other state institutions, the draft said. Income from national and international capital MARKETS and money markets can also be used to finance the fund, it said.

Some assets from the government’s privatization program will be transferred to the fund’s portfolio, according to the draft. It would be exempted from regulations including antitrust law and Borsa Istanbul fees should any of the securities it sell be traded on the stock exchange.