Turkey can forgo IMF loans

NEW YORK (Reuters) – Turkey’s economy can withstand global economic turmoil, Economy Minister Mehmet Simsek told Reuters, to the point that a new IMF standby agreement is not needed and is indeed «unlikely.» The International Monetary Fund’s $10 billion loan agreement with Turkey, which expires in May, has been an anchor for Turkey’s economy, helping it to rebound strongly from a financial crisis in 2001. Investors, wary of Turkey’s reliance on external financing, have been clamoring for information on what direction Turkey will take with the IMF when the current program expires, given the near seizing up of the global credit markets. «I feel comfortable the public sector can carry on without additional funding from the fund. So a standby arrangement is unlikely,» Simsek said in a late interview with Reuters on Monday. Simsek was in the United States for speaking engagements and meetings with investors. He will hold talks with IMF Managing Director Dominique Strauss-Kahn in Washington tomorrow. «I do not believe that Turkey needs a standby agreement,» he said. Instead it is considering either post-program monitoring or the use of a precautionary standby agreement. «No decision has been made. That decision will be made by May,» he said, noting that due to parliamentary delays there is now a need to merge all outstanding reviews and try to complete them before the IMF program expires. A key IMF concern has been the Turkey’s failure to pass a long-delayed reform of its social security system. Business groups have criticized the government for slow progress on measures to stimulate a slowing economy and pushing reforms such as social security, which is now sitting in parliament for a vote. Parliamentary approval of the reform, which will raise retirement ages in Turkey, is a precondition for the IMF to release a $1.3 billion loan tranche to Ankara. Simsek reiterated he thought the reforms would be passed in the next two weeks. «I am optimistic, I am hopeful that it will clear the parliament over the next week or two,» he said. «I would give it an 80 percent chance (of passage).» Investors are also concerned by attempts to create extra-budgetary funding for infrastructure and education projects, something Simsek categorically denies is on his agenda, saying he blocked parliamentary attempts to push such funding through. «We will not have extra-budgetary funds. If we need additional funding to finance human capital or infrastructure investments, we will do it in a transparent way that will be through budgetary procedures,» he said.

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