IMF in Turkey next week

ANKARA (Reuters) – An International Monetary Fund team due to arrive in Turkey next week is expected to focus on delayed tax reform and the country’s rising current account deficit, officials said yesterday. The IMF decided to send a team to start talks on May 8 after Turkey passed a social security reform package, but starting the talks does not automatically guarantee release of the next loan tranche, worth around $920 million. Income tax reform will be the most problematic issue during the IMF talks, economic officials told Reuters. Turkey has pledged to submit the tax reform, which aims to boost the number of taxpayers and revise tax exemption rules, to the Cabinet by end-April, to Parliament by end-May and to make it law before the end of September under Turkey’s $10 billion standby accord with the IMF. An official said even writing the draft text of the reform would not be completed before September. «We are trying to determine taxpayer portfolio for income tax. It will be good if the bill can be ready this year,» said the same official, speaking on condition of anonymity. IMF loans have helped Turkey to recover from a deep financial crisis in 2001. The Fund plans four reviews of Turkey’s program in 2006. The IMF’s representative in Turkey, Hugh Bredenkamp, told Reuters last month maintaining budget discipline and the process of privatizing state banks would also be part of the new review along with tax reform. Turkey’s yawning current account deficit will also be an issue in the talks, said another Turkish economic official.