Turkey’s economy minister, Kemal Dervis, announced that an agreement has been reached between Turkey and the International Monetary Fund (IMF), regarding a new economic program. He said the deal would be signed in early April, and in the meantime his ministry is preparing a letter of intent, including program details, which will be sent to the IMF Executive Board.
The head of the Turkey desk at the IMF, Carlo Cottarelli, is scheduled to return to Turkey within several weeks and finalize the agreement. It will then be submitted to the IMF Executive Board immediately before or after the spring meetings of the IMF and the World Bank.
Dervis said he was seeking backing from the G-7 countries for Turkey’s stabilization program, and he had met with ambassadors from those countries early in the week. He did not give any details about the program, but said that such information would only be released in mid-April, after domestic political consultations are complete.
According to the Turkish Daily News, Dervis refused to provide a year-end inflation target, but did say that by the end of the year, month-on-month inflation will have been reduced to less than two percent. He said while the 2002 inflation target will be smaller than forecast, it still is unlikely to fall to single digits.
Dervis has forecast that the Turkish economy will contract by two percent this year, mainly as a result of the financial crisis during the first half. Nonetheless, he has pledged to maintain fiscal discipline, and is predicting a four percent primary surplus ratio to gross national product. Privatization will remain a priority, however market conditions will determine its timing, Dervis said.
Addressing the Turkish situation, Michael Deppler, the IMF European department director, said that discussions are taking place on how to use the $6.25 billion that is still available from the standby arrangements and supplemental reserve facility, more effectively for Turkey's needs.
Now that the floating rate system is in place, IMF assistance is no longer needed for boosting the Turkish central bank’s foreign currency reserves. As a result, Dervis stated, the IMF is also considering the disbursement of the loan.
Deppler expects the Turkish stabilization program to lead to a recovery in the second half of 2001, and eventually to five percent economic growth in 2002. — (Albawaba-MEBG)
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