IMF-backed reform delayed
ISTANBUL (Reuters) – Turkey will delay a critical social security reform package until after this year’s elections but vowed to curb government spending to meet IMF-backed fiscal targets, Economy Minister Ali Babacan said yesterday. Babacan told a news conference the government would re-submit a much delayed social security reform package to parliament after the general elections, set for November. The government had already delayed implementing the reforms until July 1 after a constitutional court veto forced it to revise the package. «We will submit the social security reform after the election period. We predict that the reform will be put into effect six months after it is sent to parliament,» Babacan said before leaving on a trip to the USA. Babacan said he expected the IMF’s sixth review of their $10 billion standby agreement to be completed in May. An IMF team left Turkey on Tuesday without completing its sixth review discussions. It is scheduled to hold two more reviews this year and a final one in 2008 when the existing standby accord expires. The fund is expected to release a $1.125 billion loan tranche after the current review. The IMF has helped Turkey to recover strongly from a deep financial crisis in 2001. Savings Despite the approach of elections, Babacan said the government would introduce savings within a few weeks equal to 0.6 percent of gross national product, though he added they would not include cuts to health expenditure. He also said the government would consider raising prices of state companies’ products in order to improve their finances «only as the final option.» The IMF has said it will not sign off on the sixth review of Turkey’s current loan deal unless Ankara takes measures such as hiking electricity prices to improve the finances of state firms in order to meet the government’s high primary surplus target. «It appears that higher-than-projected health spending forced the government to introduce an austerity package… We think the package should be perceived as positive,» said Raymond James Securities’ chief economist Ozgur Altug. At his news conference, Babacan also said an initial public offering of Turkish state-owned Halkbank may be «one or two points» below the 25 percent previously announced. Halkbank has applied to Turkey’s markets regulator for approval of the IPO, and set a figure which, including the greenshoe option, allowing for over-allotment, amounted to 24.98 percent of the bank. Babacan said Turkey expects a total public sector primary surplus of 6.8 percent of GNP in 2007, slightly above an IMF-sought target of 6.5 percent. He expected this to be 6.7 percent in 2006. «This is a really important success,» he said, referring to the 2006 primary surplus, which excludes interest payments. He said a high primary surplus was necessary as a cushion for Turkey’s gaping current account deficit, which he predicted near 7 percent of GNP for 2007.
