Privatization revenue to be main battleground in IMF negotiations
Posted by meb at January 8th, 2009
A delegation from the International Monetary Fund (IMF) will begin talks with the Turkish government today, with the area of anticipated revenues from privatizations projected to be the main point of contention between the two parties.
The delegation is expected to urge the government to introduce additional measures to increase savings because it argues that the government cannot meet its budget targets under current conditions.
Sources close to the Treasury suggest that the main problem area in the talks between the government’s senior economy executives and the IMF delegation will be the issue of revenue from privatizations. The Finance Ministry has added the revenue expected from privatization projects as an income item for the 2009 budget. IMF officials, however, argue that the global crisis will prevent the government from earning the targeted income of TL 12 billion from privatizations in 2009.
The maximum amount of income from ongoing privatization projects, in addition to the privatization of the Turkish national lottery (Milli Piyango), has been calculated at TL 6-7 billion. On top of the funds to be transferred to the Southeastern Anatolia Project (GAP), amounting to TL 2.5 billion, there is an additional budget deficit of TL 2 or 3 billion. If the government officials fail to convince the IMF on privatization income, then new savings options will be discussed. These options include decreasing the amount of funds to be transferred to local administrations; otherwise, the IMF may lower the amount of funds it will make available for Turkey. The IMF officials also argue that the government should raise tax levels as they believe it will be hard to meet the targeted tax revenue of TL 202 billion in 2009. The government has said it does not agree with them.
The government is also keen on concluding the talks with the IMF delegation. After completing their talks with the Treasury, the Finance Ministry, the Central Bank of Turkey, the State Planning Organization (DPT), the Banking Regulation and Supervision Agency (BDDK) and other organizations, the delegation will head to İstanbul, where they will meet with representatives of the banking and non-financial sectors to discuss the financing needs of the private sector. The delegation is expected to be in Turkey until late January before returning to the US. The agreement to be made with Turkey is expected to be approved by the IMF executive board in March at the earliest. IMF Turkey desk chief Rachel van Elkan, who recently replaced Lorenzo Giorgianni, will conduct the negotiations on the new program with Turkey.
Standard stand-by a viable option
A short-term standard stand-by agreement that would allow quick financial support for amounts exceeding the member quota has emerged as the most likely option in talks with the IMF. This agreement will be for a term of up to two years, after which a precautionary stand-by deal may be discussed depending on how international markets fare in the second half of the year. In the past Turkey had inked 19 stand-by agreements with the IMF, but only successfully completed the last two of them. The first of these agreements was made on Jan. 1, 1961.
The IMF delegation had previously met with Treasury officials to insist that the primary surplus be increased and expenditures decreased. The government is expected to revise its targeted growth rate from 4 percent to 2.5-3 percent. The IMF insists that public investment and allocations to local administrations be reduced. The amount of savings suggested by the IMF is around TL 5-6 billion. Thus, in return for credit facilities amounting to $19 or 20 billion from the IMF, the amount of funds created will amount to approximately $24 billion.
source: Today’s Zaman
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