After years of bold borrowing from abroad, Turkish conglomerates, including government cronies, are sitting on a powder keg as the country’s currency turmoil keeps augmenting their debt repayment woes.

For years, Turkey encouraged sectors that lavishly borrowed and spent foreign exchange rather than investments that would generate much-needed hard currency. The party is now over. Ruled by the Islamist Justice and Development Party (AKP) since 2002, the country has amassed a giant external debt of $466 billion. Although the writing was on the wall for months, the Turkish economy hit the rocks last week.

Plagued by a chronic current account deficit and unrelenting inflation and unemployment rates, the Turkish economy’s burden has recently grown with gaping public deficits, resulting in “non-investment” grades by international credit rating agencies. On top of all this came severe tensions with the United States that resulted in unprecedented sanctions on Ankara, culminating in a Black Friday for the Turkish economy Aug. 10.

The economic hemorrhage is continuing and the real sector is on the edge. Many now wonder which businesses are first in line to throw in the towel. Are companies close to the AKP among them and could they receive a lifesaver from the government? The turmoil is so encompassing that few companies are likely to escape unscathed. Still, the cronies could be in a greater danger. Before discussing why, a brief overview of how Black Friday transpired is worthwhile.

No doubt, the row between Ankara and Washington bore on the turbulence that led to Black Friday, but Turkey’s economic indicators this year were already alarming. Inflationjumped to almost 16% in July, and the year-on-year current account deficit never eased below $57 billion, reaching 7% of gross domestic product. Despite government incentives to sustain economic growth, the seasonally adjusted unemployment rate kept growing. Fiscal discipline was undone, leading to significant public deficits. Turkey’s risk premium, reflected in credit default swaps, was already at about 320 basis points, sharply decoupling from other emerging economies. Hence, the tensions with Washington only aggravated this gloomy outlook.

In June, when Turkey held presidential and parliamentary elections, the dollar traded for 4.63 Turkish liras on average. The lira was expected to strengthen with the removal of political uncertainty after the polls, but this did not happen. Lack of confidence in President Recep Tayyip Erdogan’s regime hit the currency further, with the dollar’s average price reaching 4.75 liras in July.

On Aug. 1, Washington slapped sanctions on two Turkish ministers over Ankara’s refusal to release American pastor Andrew Brunson, which plunged the lira into a freefall anew, with the price of the greenback hitting 4.9 liras that day. The meltdown continued in the ensuing days as the new inflation data offered no hope of improvement and the prospect of reconciliation with Washington weakened, pushing the price of the dollar to more than 5.5 liras.

On Aug. 10, Turks woke up to financial havoc as the lira had already nosedived on Asian markets. The currency’s fluctuations saw drops of as much as 15% during the day as the dollar’s price shot up above 6 liras.

Ankara’s attitude was far from helpful. A defiant Erdogan declared, “If they have their dollars, we have our God,” while his son-in-law, Finance Minister Berat Albayrak, made a rather shallow economic presentation to business leaders. To make things worse, US President Donald Trump announced on Twitter he was doubling tariffs on Turkish steel because ties with Turkey were “not good at this time.”

The lira, which had sunk to 6.87 against the dollar at one point, closed Black Friday at 6.43 against the greenback. The increase in the dollar’s price stood at 70% since the beginning of the year, 37% over a month, 27% over a week and 12% for the day. Turkey’s risk premium, meanwhile, shot up to a staggering 437 basis points, up from 333 basis points on Aug. 1. As Erdogan spoke of an “economic war” against Turkey, the lira’s meltdown continued when financial markets reopened Aug. 13, forcing the central bank to step in with measures to provide liquidity.

It is hard to gauge whether the lira has hit the bottom or if there is more to it, but the country’s descent into a full-blown crisis appears inevitable. The huge increase in foreign exchange prices is bound to further fuel inflation, which, in turn, will be eroding real incomes. Companies are clearly unable to cope with such exchange rates, which will force many to scale down their operations and lay off workers. This will mean a decline in GDP, a sharp contraction and a crisis.

Companies with foreign exchange deficits are first in line to take the hardest blows from the turmoil. According to central bank data, the net foreign exchange deficit of nonfinancial companies stood at $217 billion in May. The deficit, which was $74 billion in 2010, has widened largely due to borrowing, a trend that has intensified notably since 2013 amid privatization tenders and large infrastructure projects conducted as public-private partnerships (PPP).

Some of the indebted businesses operate in the manufacturing industry, but central bank surveys indicate that most of the companies that are indebted and run deficits are those involved in PPP projects in the fields of infrastructure, energy and transport.

According to World Bank data, Limak Holding tops the PPP investment list with $43 billion, followed by Cengiz Holding and Kolin with approximately $40 billion each and MNG with $18 billion. Together with Kalyon, those four companies are building Istanbul’s third airport, one of Erdogan’s pet projects. They have all benefited from foreign loans.

The IC Group, which built the third suspension bridge over the Bosporus, is also high on the list with $16 billion in investments. In the energy sector, Sabanci Holding, whose rapport with the AKP has become increasingly open in recent days, has invested $5 billion in PPPs.

Having used significant foreign loans to carry out those projects, crony companies are now at the sharp end of the currency crisis. Many of them were also the winners of major privatization tenders in the power distribution sector several years ago. The sell-offs were denominated in dollars and the companies borrowed from abroad to pay for the acquisitions.

Building companies involved in the construction boom, which saw luxury high-rises, shopping malls and health complexes mushrooming across the country, especially in Istanbul, are believed to have notable foreign exchange gaps as well, as is Turkish Airlines, the national flag carrier, which has used foreign loans to expand its fleet.

The banks that intermediated for those companies, including Turkish banks affiliated with Europe-based lenders, are also on tenterhooks now, facing the specter of serious damage.

Written by Mustafa Sönmez