Turkey poised to start IMF talks for aid to overcome cash crunch

Published December 5th, 2000 - 02:00 GMT

Turkish financial officials are set to start talks with IMF officials here Monday, December 4, to secure financial assistance aimed at relieving money markets battered by a liquidity squeeze. 

 

A five-member delegation, headed by the International Monetary Fund (IMF)'s Turkey desk chief Carlo Cottarelli, arrived in Turkey Sunday. 

 

A second delegation, led by the organization's European Department Director Michael Deppler, is expected to arrive later Sunday, the Anatolia news agency reported. 

 

Apart from the possible aid, the delegations are also expected to discuss the country's ailing banking system and Ankara's planned structural economic reforms. 

 

The visit follows an announcement by IMF chief Horst Kohler late Thursday that the organization could release additional funds to Turkey after the central bank injected millions of dollars into money markets to meet heavy cash demands by banks. 

 

The turmoil began on Tuesday upon fears of instability in the banking system following the bailouts of some troubled banks, rumours of a devaluation and a growing concern among investors over delays in privatisation plans and introduction of reforms by Ankara. 

 

It led to a massive flight into hard currency reserves, a severe liquidity crisis on the money market with skyrocketing interest rates, which prompted emergency money injections by the central bank. 

 

The turmoil also hit the stock exchange, which closed Friday at 7,978 points, with a weekly loss of 2,831 points, or 26.2 percent. 

 

Deputy Prime Minister Mesut Yilmaz said over the weekend that the central bank had lost some $6 billion (6.8 billion euros) from its hard currency reserves in one week and blamed the crisis on foreign investors. 

 

"The demand for hard currency came mostly from foreign investors. The reason for the turmoil was not the internal markets, but the foreign market," Yilmaz said in the southeastern town of Gaziantep, according to Anatolia. 

 

In an interview with the mass-circulation Sabah daily on Sunday, Central Bank governor Gazi Ercel said that Turkey's foreign reserves stood at $18.8 billion as of Friday, compared to around $23 billion before the crisis began. 

 

On Thursday, the central bank announced that it would stop selling Turkish lira in return for foreign currency, which meant a tightening of the liquidity squeeze. 

 

Turkey's three-way coalition meanwhile announced a series of short-term measures to calm the panicking markets and reiterated its commitment to a tight IMF-backed anti-inflation program. 

 

The measures included the privatization of Turkish Telekom, the approval of a law introducing additional taxes and supplementary decrees to a law for the the rehabilitation and subsequent privatization of three public banks. 

 

Last December, Turkey and the IMF hammered out a three-year, $4 billion economic package of austerity measures aimed at reducing Turkey's chronic inflation and putting the country's economic house in order.— (AFP)  

 

© Agence France Presse 2000  

 

 

© 2000 Mena Report (www.menareport.com)

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