Turkey's government said Tuesday it would announce a deal on IMF emergency aid to save it from a cash crunch within 24 hours, sending the stock market soaring nearly 20 percent.
Junior Treasury Minister Selcuk Demiralp told Anatolia news agency that an "agreement in principle" on the funds to be disbursed to Turkey had been reached with the International Monetary Fund.
The government would maintain policies for reform, he said.
"We will finalize the amount of the aid and announce it to the public tomorrow (on Wednesday)," Demiralp added.
He refused to give a figure, but said it would be an "amount that would satisfy the markets."
The Istanbul stock exchange's national index rallied 1,426 points, or 19.5 percent, to finish at 8,755 points on its first positive day after two weeks of sharp falls.
On Monday stocks had plunged by 8.1 percent.
Turkish Prime Minister Bulent Ecevit said after meeting with his coalition partners that "everything was on the right lines" in crisis talks with the IMF missions in Ankara.
Deputy Prime Minister Mesut Yilmaz said there was "full agreement" with the IMF on measures to be taken to end the liquidity squeeze that has rocked the financial markets for two weeks.
In Washington, the IMF said it was making progress.
"We are making good progress in the talks with the Turkish authorities but we are not expecting the announcement today," IMF spokeswoman Cony Lotze said.
Overnight interest rates on the money markets in Ankara dropped to 449 percent on average from Monday's 500 percent level.
With the markets hanging on Ecevit's expected statement Wednesday, bankers expressed concern that the IMF would ask for tough measures to restructure the ailing banking system in return for the funds.
"The IMF has already underlined the need to rehabilitate the banking system, but we do not yet know what exactly they mean by rehabilitation," Disbank research director Haluk Burumcekci told AFP.
"If there is a surprise demand regarding the banking sector, there is the risk that the markets could deteriorate again," he said.
A dealer from ABN Amrobank said she was certain that the IMF would lodge specific demands on the banking market as "most of the banks were finished as a result of high interest rates."
"We cannot say at all what those demands will be -- will the troubled banks be bailed out or will they be left to go bankrupt. Both options are very hard," the dealer, who declined to give her name, told AFP.
Under a three-year, four-billion dollar deal with the IMF, Turkey promised to clean up its crowded and corruption-ravaged banking system in which many institutions made huge profits in an inflationary environment through bond investments.
The authorities have seized 10 financially troubled banks and launched investigations against their directors, including the nephew of former president Suleyman Demirel, since the IMF deal was approved in December last year.
Turkey announced last month that it would sell eight of the banks by April next year after their financial structures were strengthened, but many analysts have expressed doubt over whether Ankara had the necessary funds to carry out the task.
Some foreign experts have said that political delay in bank reforms, and then concern over criminal investigations in the banking sector, sparked the liquidity squeeze in the first place.
Moody's Investors Service threatened to downgrade the banks.
The "financial strength" ratings of all Turkish banks rated between "E plus" and "C" were placed on review for a possible downgrade, the credit rating service said in a statement.
"The review results from the current liquidity crisis and the ensuing high level of interest rates, which are inevitably having an impact across the whole financial system," it said.
"If there are to be banking failures -- and this appears increasingly likely -- they are likely to happen sooner rather than later, and so Moody's intends to conclude its review within the next several days.
A crisis injection of liquidity by the central bank last week had undermined the credibility of monetary policy and increased pressure on the Turkish lira, they said, spreading the crisis through the Turkish financial system.
In the past two weeks the central bank has depleted its reserves by about six billion dollars to meet heavy demands from banks for dollars, officials said -- ANKARA (AFP)
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