ANKARA/NEW YORK (Reuters) – Any additional spending following war in neighboring Iraq will be met by cuts from other spending items in Turkey’s 2003 budget, according to a measure passed in Parliament yesterday. Turkish officials say they are concerned that fighting in Iraq could spark a wave of Kurdish refugees toward its southern border and has a large military force poised near the frontier to marshal refugees and provide for any humanitarian needs. The budget, central to hopes of winning a $1.6 billion loan payout from the International Monetary Fund, has been working its way through commissions and Parliament for weeks and is set for a final vote probably tomorrow. In the provision voted into the budget yesterday, the Cabinet will be responsible for setting how much extra military spending is needed. Turkey has bowed to US pressure and promised that any military incursion into northern Iraq will be for humanitarian purposes and in coordination with the United States. Keeping within budgetary limits will be crucial to the success of the IMF program and to market confidence in the Justice and Development Party (AK) government. Officials have already announced a «tight cash management» plan for the budget under which some 4,000 trillion lira ($2.3 billion) of spending allocated in the budget will not be made in an attempt to meet IMF targets for the primary surplus. Bonds move lower Turkish bond prices tripped lower yesterday, under pressure from investors unsure that the cash-strapped government will receive US financial aid in time to remain solvent. US President George W. Bush’s $75 billion war budget provided for $1 billion in cash grants to Turkey, which boosted the country’s asset prices earlier this week. «But in the light of day, people are waking up to the fear that it may not come through in time to rescue Turkish financial markets,» said Daniel Hewitt, a Turkey expert at Alliance Capital Management. Amid indications that the aid may be hard for Congress to approve in light of Turkey’s lukewarm cooperation with the US war effort against Iraq, Turkish total returns dived more than 2 percent yesterday after a rise of more than 5 percent during the preceding two sessions. So far this year, the country has bled 12.2 percent, while JP Morgan’s Emerging Markets Bond Index Plus has risen 6.7 percent. «The US aid, which could face problems in Congress, is conditioned on Turkey maintaining its International Monetary Fund program,» Hewitt added. «But the track record of this government makes it difficult to believe that they will implement a seamless IMF program. It’s a very uncertain situation.» The US Army had been slated to deploy to Turkey and invade northern Iraq from there in order to force the Iraqis to fight on multiple fronts. But Turkey denied permission for US troops to launch such an invasion from its soil. US troops parachuted into Kurdish-held northern Iraq yesterday to open a new front. A pipeline that carries Iraqi oil from the city of Kirkuk to Turkey’s Mediterranean port of Ceyhan was still pumping oil at very reduced rates yesterday, a Turkish energy official told Reuters. Shipping sources say there has been no loading at Ceyhan since March 20 when a capacity of 600,000 barrels was loaded. «The flow is continuing at very low rates,» the official said. «It may still take few days for tanks to fill up fully.» The United Nations continues to allow exports of Iraqi crude through Ceyhan even as it has suspended such exports through the Gulf port at Mina El-Bakr because of an absence of UN international staff to oversee tanker loadings. UN international staff were ordered out of Iraq on March 17 but they remain in Ceyhan, allowing exports in the UN oil-for-food program. Storage capacity at Ceyhan is about 6.5 million barrels.