ECONOMY

IMF approves $16-bln loan for Turkey despite bad news

The International Monetary Fund announced yesterday it had approved a $16 billion three-year loan program for Turkey – which a source said comprised $12 billion in new funds and $4 billion from an existing facility – making the nation the lender’s largest-ever borrower. The IMF said in a statement that its executive board had «approved a three-year stand-by credit for Turkey, worth about $16 billion, to support the government’s economic program for 2002-2004.» The lender added that about $9 billion of the funds will be available immediately. «The loan was approved,» one IMF board member told Reuters after the IMF’s executive board wrapped up a three-hour meeting on the issue. «It is $12 billion in additional financing.» While the IMF approved a $16 billion program for the coming years, Turkey already had about $4 billion left under its existing $19 billion loan program. The latest cash boosted IMF commitments to Turkey under its current economic program to about $31 billion, making it the lender’s largest-ever program, topping the $22 billion the IMF committed to Argentina. The latest Turkish cash will be used to bridge a financing gap this year as Ankara struggles with its worst recession in more than 50 years after the knock-on effects of Sept. 11 rattled its already shaky economy. However, reforms demanded by IMF, such as privatizations, may be put on hold now, Turkey’s top economic minister has indicated. Turkey will probably hold off until 2003 on the privatization of firms like Turk Telekom and Turkish Airlines, due to the global economic slowdown, Economy Minister Kemal Dervis said in a newspaper interview published on Monday. «The state of the world economy no longer commits us to selling big public companies at the moment,» he was quoted as telling French daily Le Figaro in an interview. «That’s the case in telecommunications with Turk Telekom and also in air transport with Turkish Airlines,» Dervis said. «In any case, the large privatizations will not happen until 2003,» he said. Dervis said one of his main priorities was to reduce inflation to 35 percent this year and 20 percent in 2003. «The central bank will take this inflation target into account in monetary policy as is done in the eurozone,» he said. Yesterday, Dervis said he was disappointed by January inflation numbers but expects price increases for the full year to fall within the 35 percent target. «The recent January numbers are a little bit disappointing,» Dervis told foreign investors in New York. January consumer prices (CPI) rose 5.3 percent month-on-month against predictions of 4.1 percent. Turkish January wholesale prices (WPI) rose 4.2 percent month-on-month in January. Annual WPI stood at 92 percent and annual CPI at 73.2 percent. Dervis attributed the stronger-than-expected increase to the cold winter and a bad agricultural year. «I do believe the 35 percent target for 2002 is perfectly achievable,» he said. Dervis also said that he believes the Turkish lira, which lost more than 50 percent of its value in early 2001 when the country moved to a floating exchange rate regime as banks were near collapse, will remain relatively stable and therefore not spur inflation by driving up import costs. The CPI rise thwarted hopes for a central bank rate cut analysts hoped would send bond yields lower and boost lending to Turkey’s crisis-hit economy. Instead yields on the busiest September 4, 2002 paper rose to 70.21 percent from Friday’s 68.87 percent while the lira (CBTR edged down to 1,313,000 to the dollar from 1,303,000.(Reuters)