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    IMF urges Turkey speedy decision on future relations

    Hurriyet English
    12.05.2008 - 11:41 | Son Güncelleme:

    The Turkish government should make a speedy decision to avoid an increase in the uncertainty among investors at a time when the effects of a global credit crunch persist, the IMF said in an interview published on Monday. (UPDATED)

    "To the extent that it (no decision) increases the uncertainty among investors, a decision would be better sooner than later," Lorenzo Giorgianni, chief of the IMF's Turkey desk, told the Financial Times in a telephone interview.    

    Turkey successfully completed its $10 billion loan agreement with the IMF over the weekend. The Turkish government has said it wants to continue a close relationship with the fund, but no decision is made yet.

    "There was a lot of hard work, a lot of it behind the scenes, by government and central bank officials, to make this work," Giorgianni was quoted as saying. He added whatever programme replaced the $10bn agreement should be "home grown," and urged a speedy decision. 

    The IMF had said Turkey considers two options; one of them may involve a so-called non-disbursing loan program, or a period of enhanced economic surveillance that includes twice-yearly IMF assessments.

    Giorgianni also said Turkey had over-achieved in some key respects, given that some targets - such as growth in gross domestic product, public finances, debt ratios and reserves - were all above the initial targets.

    Turkey has borrowed $45.8 billion from the IMF since the financial crisis in 2001 and was the fund's last major borrower from a string of crises in emerging economies including Brazil and Argentina, which repaid their IMF debt ahead of schedule.

    Giorgianni also told the CNBC-e broadcaster in an interview on Monday Turkey needs to stick to fiscal discipline as it studies its options on new form of relations with the fund. A continuation of macroeconomic discipline with or without the IMF was key for Turkey, he said. He added that investors would reward good economic policies by making new investments, he added.

    Turkey needed to stick to its revised economic program goals and maintain macroeconomic discipline, he added. Giorgianni also said the reforms would be important at a time of rising inflation and slowing growth.

    Giorgianni said sticking to fiscal discipline in the past created room for cutting primary surplus goals, but Turkey needs to adhere to the new goals. The Turkish government has cut its key target of total public sector primary surplus, which excludes interest payments on the government debt, to 3.5 percent this year from 4.2 percent in.

    The Turkish government's decision to cut its primary surplus target, a key element of the country's fiscal discipline, ahead of the expiration of IMF agreement increased concerns over the economy. Turkey plans to finance structural reforms with the financial resources it will get by cutting the primary surplus target, a move widely seen as an attempt to move electorates in the local elections in 2009.            

     

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