The ongoing uncertainty of Turkey’s economic recovery plan drove Istabnbul’s stock market down 9.1 percent on Monday, March 12. Turkish Prime Minister Bulent Ecevit, following a meeting with his two coalition partners and the newly-appointed Economy Minister Kemal Dervis, stated that “talks were productive… and the work will continue for several more days.”
The fact that a concrete plan has not yet been established drove the Istanbul stock exchange index down 9.1 percent to close at 8,647—well below the 9,513-point level at which it had closed on March 2 ahead of the nine-day Muslim feast of Eid Al-Adha. Analyst do not expect much improvement until a tangible outline of a new economic program is formulated. They suspect that investors were particularly disappointed by Dervis' failure to announce concrete results from his trip to Washington last week to meet with US and IMF officials.
Although the prime minister reassured the public that bank account holders should not fear for their savings, he said that reforming Turkey's crowded and weak banking sector, widely blamed for the recent financial turmoil, was a major topic in the government's discussions.
In February, Turkey tumbled into its second financial turmoil in six months, on fears of political instability after Ecevit clashed publicly with President Ahmet Necdet Sezer over ways to fight corruption. The turmoil lead to a severe liquidity crunch as interest rates sky rocketed, forcing the government to abandon a pegged exchange rate policy, which was the key part of the IMF-backed program that began in December 1999.
Since February 22, when exchange rates were left to float, the Turkish Lira lost approximately 27 percent of its value against the dollar.
The government is now working on the revision of its macro-economic targets, including a new forecasted inflation as a result of rising prices and additional strains on the budget. IMF spokesman Thomas Dawson told reporters in Washington that "it is premature" to talk about IMF support for Turkey before it finalizes its economic program.
According to the IMF’s original recovery plan, the Turkish government aimed to reduce inflation from 39 percent in 2000 to 12 percent by the end of this year. Officials predict the crisis will force the government to revise its target up to 20-25 percent. — (Albawaba-MEBG)
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