ECONOMY

IMF approves $661 million loan package for Turkey; progress seen ‘impressive’

WASHINGTON – Praising Turkey’s impressive economic performance, the International Monetary Fund approved a new $661 million loan package on Friday, the latest installment in a multibillion dollar program aimed at helping the country’s economy. The IMF said Turkey, a key US ally in the war on terrorism and efforts to stabilize neighboring Iraq, may borrow the money immediately. The IMF’s 24-member executive board approved the loan, the eighth installment under an economic support program that began in February 2002. So far Turkey has drawn $16.8 billion in loans out of a total package $18.6 billion. After the board’s action, Rodrigo Rato, the IMF’s managing director, said Turkey’s economic performance continues to be impressive. The economy was hit hard by financial market disruptions in the wake of the Sept. 11 terrorist attacks on the United States. «Growth has been sustained and rapid and is likely to exceed this year’s 5 percent target,» Rato said in a statement. «Inflation has been lowered dramatically to single digits and the 12 percent end-year target is clearly achievable.» Under the circumstances, the IMF said it had decided to overlook what it called «a small deviation» by the Turkish government from its agreement with the IMF to control the growth of the country’s money supply. Rato said the country should not let its current account deficit expand much further. «So far the financing of the deficit has not been a problem,» he said. «Indeed the central bank has been able to build reserves during the first half of the year.» He urged the government to observe «strict financial discipline… at least until the risks to the current account have been clarified.» Turkey’s current account deficit was equal to 2.9 percent of the country’s gross domestic product. The IMF expects the percentage to drop to 2.4 percent in 2005. Looking ahead, Rato said, the authorities need to regain momentum in privatization and step up efforts to attract foreign investment. He said adoption of new banking legislation in line with European standards «will also be a key landmark.» The United States, the largest shareholder in the 184-nation IMF, has strongly supported the Turkish loan program.