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    Turkish government drags its feet on a new IMF deal despite turmoil

    HotNewsTurkey Staff
    27.10.2008 - 10:31 | Son Güncelleme: 27.10.2008 - 13:45

    The messages sent from the capital Ankara signal the Turkish government is reluctant to renew its IMF stand-by agreement including financial aid despite growing pressure from investors amid global financial crisis. (UPDATED)

    The Turkish economy does not need financial support from the IMF, the head of the central bank said a day after Prime Minister Tayyip Erdogan slammed those who demand a new deal with the IMF and declared his administration would not bow to the fund.

     

    Market players and the business community have been piling pressure on the government to make a rapid decision on the future shape of relations with the IMF amid a growing global financial crisis.

     

    The IMF and the European Union process are seen as major anchors of the economy. Turkey’s latest $10 billion stand-by agreement with the IMF had expired in May.

     

    The governor of the Turkish Central Bank said the economy faces "a serious foreign exchange liquidity problem" and some measures should be taken to overcome this issue.

     

    "At this stage we, as the Turkish Republic, do not need money from the IMF, however there are uncertainties about what we can face in the coming period. Therefore we see it as beneficial to implement some regulations in order to restore confidence in the global markets, but at the end of the day this is a political decision. And it depends on the government's will," Durmus Yilmaz told reporters in Nicosia where he attends a conference.

     

    GOVERNMENT RELUCTANT

    Although the central bank had passed the ball to the political authority, officials voice their reluctance on the renewed IMF support ahead of the local elections in 2009.

     

    "In the crisis period, we will not bury the future in the darkness by bowing to the demands of the IMF," Tayyip Erdogan said at this ruling Justice and Development Party's (AKP) local congress in Istanbul on Sunday.

     

    Erdogan sent a message to the IMF delegation and said: "If you (IMF officials) reach an agreement with us about the budget within a framework of flexibility, then you do. But if you adopt an approach of squeezing our throats not to miss an opportunity, we will not say yes to that, no matter what the price."

     

    Officials had ruled the possibility of garnering financial support from the fund.

     

    "Of course we can make an agreement. However it has some problematic aspects. First of all the IMF would not open a credit line once we make the agreement. In order to give the credit, it would ask for cost cuttings," an official told hurriyet.com.tr.

     

    Such a deal would mean a reduction in investments, production and consumption, and create a slower economy as a result, the official added.

     

     

     

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