Prime Minister Bulent Ecevit said on Wednesday that the International Monetary Fund (IMF) would provide $10 billion to underpin reform of the Turkish economy, marking a turning point in a two-week financial crisis sparked by problems in the banking sector.
The figure amounted to about three times the funding given by dealers in financial markets as the amount needed to restore confidence in the Turkish currency and reform policy. Overnight, the World Bank had signaled in Washington that it was about to consider assistance amounting to five billion dollars, and the United States also expressed support for Turkey.
In Ankara, before Ecevit spoke to a press conference, stressing that the government was still aiming to reduce inflation to 12 percent next year, the Turkish bank regulatory board had announced action over two banks in trouble.
It said that management of Demirbank was being handed to a central fund which has already taken over administration of 10 ailing banks, and that it was withdrawing the banking license from Park Investment Bank.
Ecevit declared: "Talks over additional financial resources with the IMF to support a strengthened economic program have ended in full agreement. The details of these additional resources amounting to $10 billion will be revealed by the treasury under secretary and IMF officials shortly."
Ecevit said that the government had also decided to implement a series of measures to “strengthen the banking sector, increase its foreign currency revenues through privatization and to speed up the decrease in inflation". Ecevit said the government would continue its guarantees for accounts in banks and loans to the country's ailing and crowded banking sector. But he said there would be no guarantees on the accounts of bank owners, accounts related to legal crimes, and the capital of bank partners. "This guarantee will stay in place until there is once again confidence in the banking sector and the sector becomes healthy without additional help," Ecevit said.
Ecevit also said that the Turkish privatization office would announce by December 14 the terms of a tender for the privatization of 51 percent of Turkish Airlines (THY). The tender announcement for the long-delayed sale of 33.5 percent of the Turkish Telekom would also be announced by December 14, he said. He added that the strategic investor of Turk Telekom would also have control of the company, a thorny point, which had led to the failure of the first tender to privatize the state-run company.
The government would also submit to parliament a draft bill until December 14 for rapid privatizations in the electricity sector, which Ecevit said he hoped would come into force by the end of January. "Privatization revenues will be an important fund for the budget deficit and will contribute to compensate for the depleted hard currency reserves," the prime minister added.
He said the government was determined to reach end 2001 inflation targets of 12 percent in consumer prices and 10 percent in wholesale prices, and to improve Turkey's position on international markets.
Ecevit's announcement came after two weeks of grave cash shortage on the money markets, sparked by concern about bank reform. The turmoil caused the central bank to suspend tight monetary policy by injecting liquidity into the market, and to increase short-term interest rates briefly to 1,700 percent to relieve pressure on the lira which is pegged against the dollar. — (AFP, Ankara)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)