IMF says it is ‘encouraged’ by AK’s economic policy statements
ISTANBUL – The International Monetary Fund (IMF) said yesterday it was encouraged by statements on economic policy made by Turkey’s new government as the crisis-hit country works to implement a $16-billion pact. Turkey’s financial markets have soared since the Justice and Development Party’s (AK) landslide election win on Sunday. Analysts have said the rise reflected confidence in the new government’s approach to reforms demanded by the IMF program. «We are encouraged by the statements the party has made concerning the economic program. We expect the mission will be invited back soon to continue discussions on the program,» Odd Per Brekk, the IMF’s representative to Turkey told Reuters. Turkey must complete a range of outstanding reforms to earn the next $1.6-billion loan tranche from the fund. The AK has said it may seek revisions to the pact after the completion of a current review. Yields on Turkey’s massive debt load have fallen some 7 percentage points since the party’s election win brought to power Turkey’s first one-party government in more than a decade. «The markets have also welcomed the responsible line taken by the party,» Brekk said. Though the AK reiterated pledges on Tuesday to stick by the IMF accord, it has said it could seek revisions following the latest IMF review and would alter the outgoing government’s 2003 budget, prepared with IMF blessing, «with a new perspective.» It also quickly vowed to cut energy taxes in an effort to ease the pain of NATO member Turkey’s worst economic slump since 1945. The fund announced in October a delay in its latest review of Turkey’s pact, citing belated measures to lay off thousands of public workers, tax reform and a privatization plan for state tobacco and alcohol concern TEKEL. A 6.5 percent primary budget surplus and pledges by the outgoing government to slash thousands of jobs in the public sector may not be negotiable as AK leader Recep Tayyip Erdogan sits down with the IMF in the coming weeks. Turkish markets traded mixed yesterday following a post-election rally as investors erred on the side of caution, awaiting clear moves on IMF reform from the new government. Stocks closed the day up 0.22 percent, while the benchmark July 2, 2003 bills ended at yields of 56.74 percent from Tuesday’s 57.53 percent. The same paper was at yields of 57.49 percent in trade value-dated Thursday. The lira edged down to 1,645,000 to the dollar from Tuesday’s 1,641,000, but it was well off Monday’s record low of 1,737,000 plumbed on initial nerves over the poll result. Analysts say investors are now more optimistic that a party with roots in a pro-Islamist movement, set to establish Turkey’s first single-party government in more than a decade, may be its best chance to reverse a deep economic recession. «AK is no longer seen as a threat to the system… People now think their single-party government could be great for Turkey,» said Volkan Kurt at ABN Amro.