Turkey issues Letter of Intent pledging economic reforms to IMF
The Turkish government has issued a Letter of Intent describing the economic policies it intends to implement in the context of its request for financial support form the International Monetary Fund (IMF).
To build on its achievements of 2003, the Government of Turkey plans to deepen and advance its economic reform agenda in convergence with European Union standards. The reforms are aimed at putting the fiscal accounts on a more sustainable medium-term footing, moving the banking sector further in line with best international practice, and facilitating private sector development and investment, stated the Letter of Intent.
The 6.5 percent of gross national product (GNP) public sector primary surplus target remains a cornerstone of Turkey's program. The authorities plan to implement a package of corrective fiscal measures that are expected to yield 1.7 percent of GNP over the remainder of 2004. Many of these measures are permanent to help secure not only this year's target but also the medium-term fiscal position.
While protecting key social spending programs, the government recently passed legislation cutting discretionary expenditures by 13 percent and reduced investment incentives, saving some one percent of GNP. Petroleum, tobacco, alcohol and gas excises have all been increased to yield 0.5 percent of GNP and state enterprise prices and excises will be adjusted in line with budget assumptions during the year, the government states.
As for monetary policy, the Central Bank of Turkey (CBT) remains focused on achieving this year's 12 percent inflation target. Last year, the bank met all monetary targets and succeeded in reducing inflation to 18.5 percent. In light of increased real currency demand due to the fall in inflation and the increase in banks' required reserves, CBT has proposed raising base money targets for the remainder of the year.
Privatization is accelerating and the government states its determination to build further momentum in this area by establishing a comprehensive privatization strategy for the remainder of the year. Having secured cabinet approval of a privatization plan for Türk Telekom last November, authorities expect to move ahead with the block sale of 51 percent of the shares by end-May 2004.
Following a year of successful macroeconomic management under the IMF -supported program, the Turkish economy is now at its strongest in a generation, said the Letter of Intent. Last year, the economy grew by around six percent in exceeding the five percent growth projection. Financial markets remain positive, with benchmark bond yields halving last year to stand now at close to 20 percent. — (menareport.com)
© 2004 Mena Report (www.menareport.com)