The International Monetary Fund's number two, Stanley Fischer, on Saturday, July 28, praised Turkey's efforts to heal its battered economy under a tough economic program, but urged caution over high interest rates and worn confidence.
"Turkey has made very impressive progress in implementing the ambitious programme," Fischer told a press conference in Istanbul after two days of talks with officials and business leaders.
"Turkey has a viable economic strategy, but its success depends on restoring confidence and reducing interest rates," he added. Turkey started implementing a tough program of economic recovery in April, with multi-billion-dollar aid from the International Monetary Fund (IMF) and World Bank.
The moves came after a government decision to float the Turkish lira in February caused the currency to slump massively against the dollar. Since then, markets have remained volatile and the lira suffered sharp declines earlier this month as market worries over political harmony in the government, coupled with economic hardship in Argentina, sparked a rush for dollars.
The IMF official ruled out any modification to the floating currency regime, which he said was "essential" under the current economic conditions. However he noted that the central bank would continue to intervene to smooth out any major fluctuations on the market.
Fischer also announced adjustments to Turkey's year-end inflation and growth rate forecasts in the light of recent economic developments. Year-end wholesale inflation would be "of the order of 58 percent", Fischer said, in contrast the program's earlier forecast of 57.6 percent.
"However, authorities continue to aim to have the monthly increase rate down to two percent," he added, noting that that chronic inflation, currently around 56.1 percent in consumer prices, was showing signs of coming down.
Fischer also said that the economy was expected to contract by 5.5 percent. Ankara's earlier forecast had put the year-end growth rate at -3.0 percent. He added that the country's external current account was expected to show a surplus of about $5 billion (5.7 billion euros), in contrast to a previous forecast deficit.
Turkey's Economy Minister Kemal Dervis, meanwhile, said that they were planning to bring down inflation in consumer prices to between 30 to 35 percent in the next 12 months. "This is not a definite inflation target, but a forecast," Dervis underlined.
Fischer also lauded the leaders of Turkey's three-party coalition for their "unanimous" support the program, praising both the government and parliament for delivering on their commitments under the program. The visit "has given me fresh assurance that the international community is likely to continue supporting Turkey and be justified in doing so," he added.
The IMF official applauded a recent series of measures aimed at encouraging investments in the lira, saying they would significantly reduce for the required rollover of domestic debt.
"Turkey has a well-defined, coherent economic strategy that it is pursuing with tenacity," Fischer said. "You can be sure that the IMF will continue to support Turkey's program."
The IMF's executive board is scheduled to convene on August 3 to discuss the release of the next tranche of financial aid—some $1.5 billion—before it goes into summer recess, he said.
By the end of the year, Turkey is expected to receive $15.7 billion from the IMF and the World Bank to implement comprehensive economic reforms underlined in its program. — (AFP)
© Agence France Presse
© 2001 Mena Report (www.menareport.com)
