Turkey mulls post-program monitoring with IMF
Posted by meb at April 11th, 2008
Turkey’s shaky relations with the International Monetary Fund (IMF) are about to enter a new phase as the current stand-by agreement is slated to end next month.
Analysts have been discussing the possible future course of relations, which may take the form of either a precautionary stand-by agreement or post-program monitoring. However, these discussions are likely to end now as Economy Minister Mehmet Şimşek said yesterday that Turkey would automatically choose the post-program monitoring option if it does not make early payments.
Şimşek held a press conference yesterday before leaving for Washington, D.C., to attend the IMF-World Bank Spring Meetings. “Post-program monitoring will begin if we do not make early payments as we had already exceeded our quota,” he said. Şimşek emphasized that conditions on funds acquired from the IMF were comparatively better than on loans secured from the markets and that this was why they were not planning to make early payments.
Still, the minister didn’t commit himself by singling out any option instead, he reiterated that the choice belongs completely to the Turkish government on how to continue after the stand-by program and that both of the alternatives — precautionary stand-by and post-program monitoring — were among possibilities at the moment.
The precautionary stand-by deal will not envisage the use of a loan along with the stand-by deal but still promises to provide a certain amount of money if Turkey needs it in the future due to turmoil or trouble in the economy. Those who claim Turkey should opt for this program alternative say Turkey’s current economic infrastructure, which has proven solid during recent global turbulence along with accompanying structural development, being a net payer to the IMF, progress in the accession criteria for EU membership, a massive inflow of foreign capital and an increase in international financing options provide an opportunity to negotiate on better terms. With this option, Turkey will keep its right to take the money that the IMF provides as loans. Post-program monitoring, on the other hand, does not involve the delivery of loans to the country in question.
Şimşek also spoke about his planned negotiations during the visit. On the sidelines of the Spring Meetings, in which top officials from countries around the world gather and share opinions, Şimşek will have talks with World Bank President Robert Zoellick, European Investment Bank (EIB) President Philippe Maystadt and African Development Bank President Donald Kaberuka as well as other professionals.
The minister will speak at a conference at George Washington University tomorrow on the outlook of Turkish financial markets within the global system and at a seminar session organized by JPMorgan. He will also join a meeting at the Brookings Institution, a research and policy institute.
Şimşek said further negotiations with the IMF would take place under the review program and that he aims to complete the review with success. Around $3.7 billion is expected to be released to Turkey before the end of the stand-by program.
He will attend a conference organized by the International Finance Corporation on April 14 on global capital markets and emerging economies and participate in the Turkish-American Business Council’s annual conference in Washington, D.C. Following the negotiations and meetings Şimşek will go to New York, where he will meet with top executives of global investment institutions and credit rating agencies and give presentations at leading investment banks such as Goldman Sachs.
Şimşek will then go to Brussels to attend an event organized by the Turkish Union of Chambers and Commodity Exchanges (TOBB).
‘Turkey has remained on track so far’
Answering questions after addressing reporters, Şimşek said he had always emphasized that Turkey would somehow be affected by global market turmoil; however, he added that Turkey had so far only felt a limited impact of the crisis.
The minister noted that although volatility in the İstanbul Stock Exchange (İMKB) was comparatively high due to the dominance of foreign investors, the non-financial sectors were only lightly affected. “Turkey has been on the right track so far. There was a slowdown in growth last year which mainly stemmed from a decline in agricultural output,” he said, emphasizing that Turkey’s growth in non-agricultural sectors was over 5 percent.
Şimşek also noted that uncertainties in domestic and external markets are being monitored.
source: Today’s Zaman
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