IMF chides Turkey on wage hikes, grain prices

Published June 12th, 2001 - 02:00 GMT

Turkey has done generally well in implementing reforms to its crisis-hit economy but failure to keep commitments on public sector wage hikes and grain prices have caused the cash-strapped state to rack up additional costs, the International Monetary Fund (IMF) said Monday, June 11. 

 

"In a few areas... there have been deviations from the program's assumptions. These relate particularly to the public sector wage agreement and the wheat price position," the IMF's Turkey desk chief Juha Kahkonen told a news conference in Ankara. "(These) have had some fiscal costs," he added  

 

Last month, the government reached agreement with public workers to grant a 15-percent pay increase for the second half of 2001, a 10-percent hike for the first half of 2002 and a further 10 percent in the second. 

 

It also set wheat support prices at 164,000 Turkish liras ($0.13) in June, with the price being revised upwards each month thereafter. 

 

Both decisions are higher than Ankara pledged in its letter of intent to the IMF in return for the release of several billion dollars to help the country's battered economy. 

 

Kahkonen said that the ruling coalition had started to take additional fiscal measures to put public sector finances on track, but refused to elaborate. 

 

The IMF official listed several priorities to be addressed in the next few weeks, including the approval in parliament of a draft bill to liberalize the tobacco industry and a supplementary budget of 30.8 thousand trillion liras (some $25.6 billion). 

 

He added that government also needed to achieve further progress in the weak banking sector, which is seen to be at the root of the country's economic woes. 

 

Emlak Bank, one of the three troubled public banks which have run up a total of some $20 billion in losses, had to be closed in line with Turkey's "clear commitment" in the letter of intent, Kahkonen said. 

 

He also expressed support for the government's debt-swap plan under which Ankara would convert a limited part of its Turkish lira debt into longer-term debt backed by foreign currency. 

 

"We think that if the swap is implemented successfully it would help lengthen maturities of government debt and in that way it would help to reduce the rollover problem," Kahkonen said. 

 

In order to overcome a grave cash crunch, Turkey floated the currency in February, causing the Turkish lira to lose about 40 percent against the dollar and disrupting an IMF-backed anti-inflation plan in place since December 1999. 

 

To put the battered economy on track, the government has begun implementing a tough program of reforms, which received multi-billion-dollar support from the International Monetary Fund and the World Bank last month. ― (AFP, Ankara) 

 

© Agence France Presse 2001

© 2001 Mena Report (www.menareport.com)

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