IMF raises potential loan support for Turkey
Posted by meb at October 27th, 2008
Turkey will be able to tap into $8.8 billion of financial support from the International Monetary Fund (IMF) as a result of a recent decision by the organization to increase borrowing limits to five times capital subscription quotas for members with developing economies to counter the harsh effects of the global financial crisis.
A quota is the amount of capital a particular member country promises to contribute to the IMF annually. Under current conditions, an emerging country is able to borrow up to three times their quota, and the standard IMF repayment term for the loan is three to five years.
Considering that Turkey’s current quota is 1.19 billion Special Drawing Rights (SDRs), equivalent to $1.77 billion, it will be able to draw on $8.8 billion if it deems necessary. The new IMF plan echoes initiatives in the US and Europe to provide funding to the banking system to avert a collapse in the financial system. Reuters disclosed the plan on Friday, citing IMF officials. This will allow Turkey to garner financial support from the IMF without signing a politically uncomfortable stand-by agreement. The government has occasionally expressed its reluctance to secure an IMF loan but has not ruled out the option of sealing a precautionary stand-by deal, which would provide a financial anchor without adding to the country’s overall debt. Meanwhile The World Bank plans to increase loans to poor countries to make up for dwindling private fund flows to these economies, Japan’s business daily Nikkei reported on Sunday.
source: Today’s Zaman
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