Turkish authorities and International Monetary Fund (IMF) officials have begun talks in Ankara over additional funds for Turkey to relieve a severe liquidity squeeze which have rattled the country's markets.
The meetings, expected to continue for about 10 days, began late on Sunday, shortly after the IMF experts had arrived in Ankara, a treasury spokeswoman told AFP on Monday.
The IMF delegation was led by the Fund's European department director Michael Deppler and also included Turkey desk chief Carlo Cottarelli.
"The Turkish government has made significant progress under its economic stabilization and reform program. The task is now to preserve these gains and strengthen policies and market confidence in the Turkish economy," IMF managing director Horst Kohler said in a statement received here.
"In particular, there is a need to strengthen Turkey's banking sector," Kohler said.
He expressed hopes that the talks would be concluded quickly to enable the IMF to decide on an enhanced support package for Turkey.
"This could happen at the already scheduled (IMF) board meeting on December 21, at which time on the basis of strengthened policies, I would be prepared to recommend that the Board provide additional resources to Turkey, including under the Supplemental Reserve Facility," Kohler added.
The treasury declined to release details on the schedule of the talks.
The IMF delegation was holding talks on Monday with officials from Turkey's board of banking regulation and supervision, the Anatolia news agency reported.
A serious liquidity crunch has recently wreaked havoc on Turkish markets, leading to a sharp increase in overnight interest rates, which exceeded 1,000 percent Friday.
The turmoil hit the stock exchange, which closed on Friday at 7,978 points, showing a loss for the week of 2,831 points, or 26.2 percent.
Observers say that an announcement by the IMF over the size of the additional fund for Turkey could relieve the markets and lead to an inflow of money into the country, which could pull down interest rates.
The panic on the markets was triggered by speculation over bank bail-outs and rumors of a devaluation as well as growing concern among investors over delays in privatization and the introduction of structural economic reforms by the government.
The government has based much of its policy on slashing inflation, and has used a high exchange rate and tight monetary conditions to do this.
Experts in European markets say that because some secondary banks relied on high interest rates in a high-inflation environment to make a profit, rather than on commercial business, and because political problems had held up reform of banking, some links in the financial chain had been squeezed hard by a shortage of liquidity as inflation fell.
They warn that if the central bank continued to relax monetary conditions, as it has done in the last few days to ease these pressures, Turkey would be in danger of being caught in an inflationary cycle – ANKARA (AFP)
© 2000 Al Bawaba (www.albawaba.com)
