Stringer/Reuters

Turkey sharply raised its benchmark interest rate this month.

But it may need a hefty credit line to avoid defaults and capital flight.

Macquarie strategists estimate it needs $75 billion — more than Argentina recently received from the IMF.

Turkey may need more than just rate hikes to shore up capital.

Specifically, it needs about $75 billion, according to Macquarie strategists Thierry Wizman and Gareth Berry. That's about 1.5 times what the International Monetary Fund agreed to loan Argentina this summer — the largest bailout deal in its history.

"President Erdogan isn’t likely to allow another rate hike," the strategists said, adding that Turkey may need to rely on new official foreign credit to convince investors to fund its short-term financing needs and avoid a wave of defaults.

Turkey has $180 billion in external debt that will come due soon, with a large portion of it in foreign currency. Meanwhile, banks are liable for another $160 billion in foreign exchange deposits.

At about $100 billion, Turkey's foreign exchange reserves look relatively inadequate. Even if its current account deficit were to go to zero, Wizman and Berry said, the country still needs least $155 billion in official reserves or credit to be safe and avoid capital flight.

Macquarie

Under criteria outlined by the IMF, it appears Turkey could qualify for an aid program similar to the one Argentina scored. But President Recep Tayyip Erdogan, a populist who pushes anti-Western rhetoric and unorthodox views of the economy, would be reluctant to deal with the red tape that often comes with an official credit line.

"Turkey [has] little chance of working a deal with the IMF," said Steve Hanke, an applied economics professor at Johns Hopkins University. "The IMF would demand to run the show in Turkey, this would be totally unacceptable for Erdogan."

Of course, it may not even matter if Erdogan were to warm up to the IMF. The US could block Turkey from receiving an official credit line, especially amid a diplomatic rift between the NATO allies. President Donald Trump has in recent months stepped up sanctions and tariffs against Ankara over the controversial imprisonment of Andrew Brunson, an American pastor.

Brad Setser, a senior international economics fellow at the Council on Foreign Relations, recently wrote that the real question at hand is whether Turkey could find a geo-strategic coalition that could lend enough to support its economy without IMF assistance.

"The answer, I think, hinges on how much money Turkey needs—and of course just how much risk a coalition of the 'friends of Turkey' might be willing to take," Setser wrote.

NOW WATCH: Apple might introduce three new iPhones this year — here’s what we know