Turkey and IMF continue talks on new standby deal

Experts say the country’s economy is more resilient than in the past

Turkey’s Economy Minister Mehmet Simsek (left) shakes hands with Thomas Mirow, president of the European Bank for Reconstruction and Development, after a joint press conference at the World Economic Forum on Europe and Central Asia in Istanbul, yesterday.

By Tolgahan Ozkan & Alexandra Hudson - Reuters

ISTANBUL/ANKARA – Turkey is continuing talks with the International Monetary Fund on a precautionary standby agreement, Economy Minister Mehmet Simsek said yesterday after an IMF delegation left the country.

Turkey’s previous $10 billion IMF standby deal – which stipulated conditions related to loans – expired in May and the IMF team had been in Ankara for post-program monitoring and talks on a possible new deal since mid-October.

Simsek said at a conference in Istanbul that Turkey was positive about a possible deal to anchor the economy and a program may be agreed to if differences with the IMF can be overcome.

Separately, a statement from the Treasury in Simsek’s name said the delegation had completed talks, focused on Turkey’s macroeconomic outlook, and left the country on Wednesday.

It said agreement was reached that the Turkish economy was more resistant to shocks. “Sustaining fiscal discipline, cautious monetary policy, active liquidity management and structural reforms to maintain improvements in private financing will be important to limiting the impact of global developments on Turkey,” it said.

There was no mention in the statement of a possible precautionary standby deal that would enable Ankara to gain access to IMF credit during times of difficulty.

The IMF’s Turkey staff team chief Lorenzo Giorgianni said Turkey’s economy was more resilient than in the past but would unavoidably be affected by the retrenchment of inflows to emerging markets.

“Buffers in bank and public balance sheets, the flexible exchange rate, and greater diversification of export markets have increased Turkey’s ability to cope with shocks,” Giorgianni said in a statement. He added that Turkey’s fiscal policy should aim to achieve the announced targets of helping to rein in financing needs and keeping debt as a percentage of gross domestic product on a downward path.

He said a stronger fiscal performance would be facilitated by a more rules-based fiscal framework, implementing stricter control of local government finances and strengthening tax administration.

Turkish monetary policy should continue to aim to bring down the inflation target, Giorgianni said.

Prime Minister Recep Tayyip Erdogan hinted on Tuesday the government may not sign a new loan accord if the global lender exerted excessive constraints on budget spending, tax rates, economic growth and investments.

Business leaders have called on the government to secure another loan deal to help limit the fallout from the global financial crisis that has already forced Ukraine, Iceland and Hungary to seek IMF help.