Turkey may delay IMF accord

The meeting of businessmen where Erdoğan spoke, held at the Rahmi Koç Museum in Istanbul late last Friday, could easily be deemed the most sincere and comprehensive talk held between the government and businessmen to date.

Although the meeting did not have a specific agenda, the topic of Turkey - IMF relations came about. Here, once again business leaders reminded Erdoğan of the urgent need for a new IMF loan. Although Erdoğan did not give specific details related to the agreement, businessmen got the feeling that Erdoğan was quite hopeful of a new IMF deal.

Negotiations with the IMF will continue for a while longer, however, a deal is closer than earlier forecasted, business daily Referans’ Ankara representative Erdal Sağlam reported, citing businessmen who attended the meeting. Several businessmen thought that the accord would probably be signed in September or October.

Discussions with the IMF are focused on tax collection. Turkey will not agree to tax control measures that might cause businessmen to withdraw capital from Turkish markets, Erdoğan said at the meeting.
 
The possibility of signing a new IMF deal before September is very low, said Sağlam. If an accord on a new letter of intent is not established for the next two to three months then the signing of the deal will be automatically postponed until September anyway, he said. June is a period when IMF officers have loose hours of work, Sağlam said. Then, July and August are when the officers take time off for vacation, he added.
 
 The only way to avoid a new IMF deal being postponed until September is if an accord can be reached within a week and approved by the IMF board before they go on vacation. That is a very tight schedule. Therefore the government will most likely chose to continue technical studies and hopefully sign a deal in September, so a new stand-by agreement between Turkey and the IMF can take effect in October.�
 
Following Erdoğan’s harsh and uncompromising words related to the IMF, he left the markets under the impression that “the government had decided not to sign a deal with IMF due to an improving global economy.”
 
However, officials have been working to assure that “the government did not back out of a possible loan deal with the IMF.” Both sides want to sign a deal, according to authorities. Although Ali Babacan has not said much since he took over the seat as economy minister, it generally believed that he has been working hard on the issue. Babacan is seeking to understand the current situation and to find a formula for a common point for the agreement, authorities said.

Lipsky to arrive n Istanbul mid-June�
 
Signing an IMF stand-by deal late September will have significance in number of ways. If a deal is signed in that period, Turkey will find itself on the top of the agenda at the 2009 Annual Meetings of the World Bank Group and the International Monetary Fund, to be held in Istanbul on Oct. 6 and 7. Such an act could also be a great contribution to the country’s promotion.
 
Meanwhile, John Lipsky, first deputy managing director of the IMF is said to be in Istanbul in mid-June. The main reason for Lipsky’s visit to Istanbul is to check on preparations for the annual meetings. However, some say that he may also participate in several meetings held by business people. Following a meeting with prominent business people on June 17, Lipsky will also attend to a meeting that will be organized by the Turkish Industrialists' And Businessmen's Association. Lipsky is expected to avoid commenting on the stand-by deal process, said Sağlam. Lipsky is expected to try and avoid talking to members of press during his visit to Istanbul, however, the stand-by deal issue may come up when he meets business people, according to Sağlam.
 
Moody’s Investors Service will not lower Turkey’s credit rating in the event that the government fails to sign up to a new loan accord with the IMF, Kristin Lindow, Moody’s senior vice president in the sovereign risk group, told the Anatolia news agency. However if a deal is not signed then the Turkish government should take the necessary measures to eliminate the uncertainties in the market. In that case the government has to focus on developing a new program that would include medium-term targets.�
 
Domestic demand is the key in Turkey’s economic revival, according to global ratings agencies, said the Anatolia news agency. Implementing relaxed measures in public finance policies can provide an increase of the domestic market.  A program that will not be supported by the fund, could weigh more into domestic borrowing. The program should focus on lowering the domestic borrowing ratio to national income and therefore helping attain a sustainable structure.