IMF to Turkey: Accelerate reforms if you don’t want further aid delayed

ISTANBUL – The International Monetary Fund (IMF) said yesterday Turkey must accelerate economic reform if the fund’s board was to meet before the end of June to approve the next payout from its $16 billion pact. The IMF had planned to convene its executive board by mid-June to approve the $500 million loan tranche. Turkish treasury officials said the IMF saw no reason to postpone the payment so long as Turkey cracked on with reforms. In stronger comments than analysts expected, the fund said Turkey’s fiscal position was under pressure and additional measures were needed. «The authorities need to take steps to keep the fiscal program on track, and accelerate key structural reforms,» IMF Turkey representative Odd Per Brekk said in a written statement issued after a weeklong inspection. «With strong efforts by the authorities, the IMF Executive Board could meet to consider the fifth review before end-June.» While Turkey has implemented some pledges made to the fund in a latest letter of intent, it has lagged on others, including laws easing foreign investment and bolstering transparency in state tenders. The ruling Justice and Development Party (AK) has been slow to sanction public sector job cuts and launched a tax «amnesty» plan the IMF regards with some suspicion. Many analysts suspect the fund may delay the board meeting by up to a month. The government hoped the board meeting would not be delayed if Parliament legislated on the delayed reforms in the coming days. The Treasury appeared more downbeat in a later written statement: «The board of directors is expected to meet in the second half of June and decide to complete the fifth review.» A 2003 economic growth target of 5 percent of gross national product and year-end consumer prices (CPI) of 20 percent were still achievable, the fund said. Key interest rates on Turkey’s massive domestic debt load stand at some 47 percent, down around 30 percentage points since mid-March, when concern began to ease for the impact of war in neighboring Iraq on Turkey’s frail economy. «To allow the favorable trends to continue, the government needs to strictly implement its economic program. Turkey’s near-term economic prospects have improved over the last several weeks,» Brekk said. The IMF welcomed Turkey meeting all the program’s monetary targets for end-April and the recent passage of direct tax reform legislation, he added. The economy grew 7.8 percent in GNP terms during 2002, above an original 3 percent target, after it contracted more than 9 percent in 2001.

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