Ankara pledges reform for funds

ANKARA (Reuters) – Turkey sent a letter of intent to the International Monetary Fund yesterday, the Treasury said, making pledges in exchange for fresh funds which had been delayed by reform glitches. Economy Minister Ali Babacan had announced earlier that the letter was about to be sent, adding that the IMF would meet before the end of the month to approve release of the new funds. The third and fourth reviews of Turkey’s economy under its pact with the IMF, on which new cash releases depend, were put back as a controversial social security reform took months to pass through Parliament. Both key bills have now been passed. Babacan said about 1.2 billion Special Drawing Rights ($1.8 billion) would be released, part of a $10 billion loan package signed to help Turkey recover from a 2001 economic crisis. The letter would put the government’s primary surplus target at 6.5 percent of gross national product although the figure was expected to come in above that this year. Senior economy officials said this week the surplus was seen at 6.7 percent. Last year’s surplus has not been published yet but the target was also 6.5 percent, although economic officials told Reuters last month it was expected to be 6.2-6.3 percent. Turkish markets have suffered a sharp sell-off in recent weeks, partly due to two months of annual inflation of around 10 percent, putting a 5 percent target for 2006 out of reach. IMF First Deputy Managing Director Anne Krueger noted last week in a visit to Turkey that inflation would come in above the 2006 target but said the fund was focused on the medium term. The central bank has said it can reach its medium-term targets. Krueger also said last week that Turkey’s medium-term outlook was stable but called on Ankara to reform the tax system and improve competitiveness. She said Ankara had assured her it was committed to fiscal discipline and there had been no discussion of further spending cuts.