Mid-term economic program may be adjusted

Turkey’s Deputy Prime Minister Ali Babacan said that some adjustments would be made to the recently announced medium-term economic program if an agreement is reached with the International Monetary Fund (IMF), news agencies reported. He said that negotiations between Turkey and IMF over a stand-by agreement are under way. Babacan was addressing the audience at the International Economic Alliance’s Global Investment Symposium in New York on the sidelines of the United Nations General Assembly and a G-20 summit in Pittsburg. Stressing that Turkey and the IMF are now more likely to sign a deal than they were three to four months ago, he said that negotiations would continue on the basis of the government’s recently announced medium-term economic programme, which focuses on putting budget balances back on track between 2010 and 2012. Commenting on the recent economic developments in Turkey, Babacan said the signs of recovery from the global economic recession are apparent. Despite the positive effects of numerous infrastructural reforms implemented in the economy between 2002 and 2007, he said economic growth slowed at the end of 2008 due to the global economic crisis. Noting that the recession also continued this year, Babacan expects positive growth by the first quarter of 2010, according to the medium-term economic programme: We are expecting Turkey’s economy to contract six per cent this year, but are estimating 3.5 per cent growth for 2010, he said. Recalling that Turkey is the only Organization for Economic Cooperation and Development (OECD) member that needed no intervention into its banking sector to overcome the effects of the global crisis, the minister noted that the banking system remained strong and resilient to the global shock thanks to a number of measures taken earlier. On being asked of a possible deal with the IMF, Babacan said: It will not be the end of the world if we do not agree with the IMF. Turkey’s economy is powerful enough to tackle tough times. However, the deputy PM said that if a deal would be reached with IMF, then the amount would be used to repay domestic borrowing if Turkey signs an anticipated stand-by deal with the fund. We will put IMF loans in the central bank’s coffers and repay our domestic debts. This will be our major operation, Babacan told the state-run Turkish Radio and Television Corporation (TRT) in an exclusive broadcast from New York. Our domestic borrowing need will fall so there will be money in the domestic market. Every one billion euro from the IMF means 1.5 billion liras to be released into the domestic market. It will be a resource to be used to revive domestic consumption and investment. It will also have a positive impact on growth, he stated. Reiterating Babacan’s statement that a standby deal with the IMF is not a must for Turkey, Turkish Banks Association (TBB) President Ersin Ozince said: Turkey has the capacity to provide sufficient foreign capital under all conditions. As a citizen, I also want to see Turkey having such a stance in regards to the issue of a loan deal with the IMF. He hailed the medium-term economic plan recently announced by the government which set clear and realistic goals, Zaman reported. Mentioning a government project to turn Istanbul into a regional financial centre, Ozince said that the city is capable of realizing this goal. In this regard, IMF and World Bank annual meetings are scheduled to take place in Istanbul on 6-7 October. Ozince added that some regulations and legal changes in taxation and infrastructure should be implemented to strengthen Istanbul’s position in finance markets. He also noted that the non-financial sector in Turkey was in good situation, adding that large firms have not faced problems as serious as in the US.