Turk plans worry IMF

ANKARA (Reuters) – The International Monetary Fund believes planned spending of 207 billion lira ($141 billion) under Turkey’s draft budget plan for 2007 is too high and wants it reduced, senior Turkish economic sources told Reuters yesterday. An IMF delegation is currently visiting Turkey to review its economic reforms under a three-year loan program. The Turkish government was told it must submit its draft budget law to parliament by today. The IMF is especially worried about the planned level of expenditure on social security and current transfers, the sources said, noting that overall spending foreseen in the draft would represent a 20.3 percent increase over 2006. «The IMF finds this figure (of 207 billion lira) very high. It definitely wants this figure brought down. It finds spending on personnel, current transfers and social security spending especially high,» one senior economic source said. If spending cannot be reduced, the source said, the IMF would expect to see increased revenues. Cutting back on expenditure was the only real option, the source added. A second economic source said savings would most likely be found by denying public sector workers additional pay increases or compensation for higher inflation. Finance Minister Kemal Unakitan said on Saturday spending in 2007 had to be higher than an earlier estimate of 190 billion lira due to higher interest rates, energy prices and pay rises for civil servants. But he also ruled out populist policies and promised continued financial prudence despite the approach of parliamentary elections set for November 4, 2007. In its talks with the IMF, EU-applicant Turkey has vowed to maintain in 2007 its primary surplus target for the public sector of 6.5 percent of gross national product. The primary surplus, which excludes interest payments, is a key indicator of state finances and the ability of the government to service its large debt stemming from a 2001 financial crisis. The economic sources said they saw no problem in meeting the 6.5 percent primary surplus target this year, noting that Turkey has seen faster economic growth than initially expected.