ECONOMY

IMF-mandated budget cuts

ANKARA – Turkey’s new government may cut its road-building projects and military spending plans to meet strict IMF budget targets, officials indicated yesterday. The High Planning Board held a two-day meeting that ended late on Wednesday on the delayed 2003 budget at which it sought to shave costs and raise cash to meet, or exceed, an IMF target for the primary budget surplus. The measures needed to make up a 4,100-trillion-lira ($2.47 billion) shortfall are expected to be finalized by the government in the coming days and presented for IMF approval. To meet the target, bureaucrats are eying cutbacks to promised state sector pay rises, plans to build new roads, as well as spending for military projects and medical coverage for the elderly, officials say. The Justice and Development Party (AK), elected in a November landslide on an agenda of poverty reduction, investment and rapid growth, will find such cuts difficult to digest, analysts say. Much of the party’s support comes from millions of Turks suffering after decades of high inflation and a grinding 2001 recession that followed two financial crises. The primary surplus measures the budgetary balance excluding interest payments on debt and is seen by the IMF and markets as a weathervane for the AK’s determination to reduce a huge domestic debt stock of more than $90 billion. The IMF wants a primary surplus on the entire public budget of 6.5 percent of gross national product (GNP). Convincing the fund that Turkey can meet that target will help with the release of a $1.6 billion loan tranche and could restore some of the fading market faith in the AK. Officials told Reuters on Wednesday that they were aiming to beat that and produce a surplus of 6.8 percent in a bid to restore market confidence in the AK’s economic plans. But reaching that target will demand some painful cuts. An official close to the talks said appropriations from the 2003 budget for road and military projects would not be released this year to help meet the primary surplus target. Also likely to be hit are promised pay rises and bonus payments to civil servants. Highway and bridge tolls also look set to rise, despite an active civil campaign to prevent price rises on the two Bosporus bridges that link Istanbul. The primary surplus for the consolidated state budget is expected to be some 19,700 trillion lira, but officials told Reuters the current draft would only produce a surplus of 15,600 trillion.