World Bank Financial Sector Desk chief Lalit Raina said that passing legislation enabling the privatization of state banks is of the utmost importance for the current Turkish stabilization program.
Raina, who was the head of the World Bank and the International Monetary Fund (IMF) delegation which prepared Turkey's financial sector report, told the Anatolia news agency that the Turkish government had pledged that state banks will be sold off.
She said the World Bank expects that this pledge be fulfilled before releasing the first US$390 million allocation of the financial sector adjustment loan (FSAL).
The bank put off the release originally scheduled for August 21 due to the government's not privatizing state banks, which accounts for 40 percent of Turkey's banking sector.
The only obstruction to the World Bank's releasing the funds is the state banks waiting to
be privatized, said Raina. "If the legal regulation is passed, no obstacle will be left before the Financial Sector Adjustment Loan."
The World Bank had said earlier that its board would discuss the loan in October instead of September, once the government passes the decree. The World Bank will approve and release the first US$390 million allotment of the FSAL, following enactment of the required law over state banks, enabling them to be privatized. The government has secured authority from Parliament to issue decrees with the power of law in order to speed up the reform process, but has so far failed to pass the decree concerning Ziraat Bank, Halk Bank and Emlakbank. Still, the process for a 20 percent initial public offering of Vakifbank, which has a different structure, has begun and is expected to be completed in October.
The World Bank requires completion of all regulations in the financial sector before releasing the funds, which are to be paid in two equal parts. The World Bank has pledged to give Turkey a total $US1.5 billion in FSAL. A condition of the second $750 million part of the loan is that all regulations in the banking sector be completed.
Granting autonomy to state banks is seen as a tough political decision as Turkish governments have frequently exploited them to serve their political interests. But both the World Bank and the International Monetary Fund (IMF), which sponsors Turkey's three-year disinflation program under a US$4 billion stand-by deal, are insisting that privatization of state banks is an essential part of a rehabilitation effort directed at the banking sector.
World Bank officials said that FSAL was raised by US$20 million, to provide funding for the structuring of the new Banking Supervisory and Regulatory Agency. The agency, aimed to eliminate political influence over the Turkish banking sector, is designed to be fully independent and enjoy wide-ranging authority over the sector. –(Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)
