Turkish markets reach year-high on loan hopes

ISTANBUL (Reuters) – Turkish shares and debt posted their highest closes of the year yesterday, while the lira firmed amid hopes that government moves to send Turkish troops to Iraq could unlock a much-awaited loan deal with the United States. However, the military-civilian National Security Council (MGK), which held its regular monthly meeting yesterday afternoon, issued only a vaguely worded statement, in an apparent move to delay any decision while the United Nations debated sending peacekeepers to Iraq. The fall in bond yields helped lift the share index to a close of 12,001.08, up 1.31 percent on the day and above a previous closing high for the year of 11,916.14 garnered last week. The lira strengthened to 1,389,000 against the dollar from 1,395,000 on Thursday, while yields on the most active August 18, 2004 debt fell to 40.37 percent from 40.99. The lira has gained 18.2 percent against the dollar this year. «There was strong foreign buying. This buying position could be related to the $8.5-billion credit (deal with the United States),» said one banker about the lira gains. Investors were hopeful of a deal on $8.5 billion in loan guarantees Washington had earmarked for Turkey ahead of the Iraq war. Turkish officials returned from talks in the United States on Thursday but no clear statement has emerged yet. Another source of optimism was a Central Bank survey which on Thursday predicted year-end consumer price inflation at 22.4 percent, down from 23 percent in the same survey two weeks ago and closer to a target of 20 percent set by the International Monetary Fund (IMF). The survey also showed a rise in forecasts for year-end economic growth to 5.2 percent from 5.0 percent in the previous survey. IMF inspection Late on Thursday, the IMF said it would visit Turkey in October to review the country’s economic performance under a $16 billion loan program. The fund released a $476 million line of credit to Turkey on August 1 after completing a fifth review and extended repayments of about $11 billion due to the fund in 2004 and 2005 to ease investor worries about the financial stability of the country. «The next review mission is likely to take place in late September or early October,» IMF spokesman Tom Dawson said. An IMF official said later the sixth review would take place in October. Earlier on Thursday, Turkey’s finance minister said Ankara would meet key targets for the 2003 budget set out in the IMF loan accord. Turkey is targeting a budget primary surplus of 6.5 percent of gross national product. The primary surplus is a key indicator of whether Turkey can pay down a domestic debt load of some $128 million. Attention now turns to a Cabinet meeting on Monday where the issue of troop deployment is also set to be discussed. Markets are worried there may be a split in the ruling Justice and Development Party over any deployment. In March, Parliament rejected a US request to deploy its soldiers to Turkey ahead of the Iraq war. The United States has since asked Turkey to send peacekeeping troops to Iraq, requesting Ankara that move quickly.