ECONOMY

Turkey wins praise from IMF for efforts to reform economy

ISTANBUL (Reuters) – The IMF praised Turkey on Monday for implementing a crisis recovery program it is backing with some $19 billion and said its board may meet later this month to approve some $10 billion more. The news coincided with a banner day for the country’s currency, the lira, which registered a four-month high against the dollar. The Istanbul Stock Exchange (ISE) also rose, to 18-month highs. «We see good progress towards implementing additional economic reforms as planned. We expect that the board meeting to approve the new stand-by accord could take place in the second half of this month,» Odd Per Brekk, IMF senior resident representative in Turkey, told Reuters. The IMF has said the new accord will cover a $10 billion shortfall in Turkey’s 2002 budget, pummeled by financial crisis in February, making Ankara the IMF’s number one client. Analysts say Turkey’s standing is far firmer than the other headline debtor, Argentina, which has elected to suspend its foreign debt payments and devalue its peso by some 30 percent. Brekk said the new three-year arrangement would balance the need to help Turkey out of its worst economic recession since 1945 with policies to tackle burgeoning inflation, which was 68.5 percent year-on-year for consumer prices (CPI) in 2001. «The new program will focus on policies to help the new economic recovery while also achieving disinflation,» he said. Turkey’s IMF pact aims to introduce an inflation targeting regime later this year as the centerpiece of its fiscal and monetary policy, but it says prices must stabilize first. Ankara is also working to pass a key IMF-backed banking reform prior to a visit by Prime Minister Bulent Ecevit to Washington where he is expected to meet US President George Bush on January 16. Brekk said the new standby accord would focus on the banking sector, as well as tight financing and economic liberalization. «Besides stringent budgetary and monetary policy, the focus will be on banking reform, improvements in public sector management and the enhancement of the role of the private sector including privatization,» Brekk said. Turkey must cut costs and raise revenues to service a domestic debt load that stood at 117,245 trillion lira (some $79 billion) in November and foreign debt of $118.848 billion. The lira currency traded at 1,397,000 to the dollar on the central bank-brokered spot market, its strongest level on that market since early September and just above a 1,400,000 level that had provided stiff resistance over previous days. «In general, the positive mood is not over. There are expectations for Prime Minister Ecevit’s visit to the USA. Macro indicators are developing on the positive side,» said Emre Nizamoglu of Sinai Investment in Istanbul. Despite the recent lira strength, the currency has still lost some 51 percent of its value against the dollar since a crisis free float in February last year. The main ISE National-100 share index rose 5.09 percent to 14,999.51 points, an 18-month-high close, responding to IMF-backed reform laws Parliament passed late last week and better-than-expected inflation data. Banking sector shares drove the rise, following news of a planned capital injection into the sector and the passage of tobacco and anti-corruption laws wanted by the IMF