IMF to offer revised proposals, TL gains against US dollar
Posted by meb at March 14th, 2009
The International Monetary Fund (IMF) has come up with more flexible terms for a possible standby deal with Turkey, saying it is ready to resume talks and is expecting the Turkish government to invite the fund to Ankara to continue discussions.
The IMF’s reassessment is largely due to a firm stance taken by the Turkish government, analysts concluded. Turkey suspended talks with the IMF last month and announced that a deal is not possible so long as the IMF insists on several new conditions that Prime Minister Recep Tayyip Erdoğan described as “unacceptable.” Following the news from the IMF, the US dollar continued to decrease in value against the Turkish lira, dropping below 1.7 on Friday after a week of upsurge in which it reached 1.8.
The US dollar was traded at TL 1.697 on Friday while it was TL 1.727 the day before. The İstanbul Stock Exchange (İMKB) also gained 1.51 percent on Friday morning, opening the day with a 354.46 percentage point increase over the previous day, reaching 23,893.95.
IMF spokesman David Hawley said on Thursday that the fund has made new loan proposals to Turkey for a probable standby deal. Asked to comment on the developments regarding the process with Turkey while speaking at a briefing at IMF headquarters in Washington, Hawley said Erdoğan expressed his concerns over the IMF proceedings, adding that the fund submitted modified “policy and reform proposals” to Turkey. He said IMF representatives were prepared to go to Ankara when Turkey is ready but declined to comment on the proposals and date of probable visit.
Economy Minister Mehmet Şimşek said on Thursday IMF started to be “flexible” on some matters, such as tax administration. In an exclusive interview with CNN Turk, Şimşek said Turkey should find a tax administration model suitable to its own structure because “installing the tax administration model of another country can be harmful.” He went on to say that the IMF wanted “cross tax inspection” which enables the government to investigate the sources of taxpayers’ income in depth and warned that such radical moves might stunt the inflow of money to Turkey and further deepen the crisis. Şimşek said a program that would benefit Turkey might be prepared in case an agreement is reached with the fund. Meanwhile, Şimşek is expected to meet with IMF officials at the G-20 summit in London. Şimşek is also due to meet with the IMF directing manager, Dominique Strauss-Kahn, on Saturday. In the meantime, Erdoğan said on Friday that Turkey, with its strong economy, will not bow to the demands of the IMF, noting that the government has not yet received any new proposals from the IMF for loan talks.
Erdoğan also said the government did not expect the budget deficit to be more than 6 percent of the total budget. Recalling that some people advise the government to stick to “permanent income sources,” he said there is no such thing in economics, and circumstances change rapidly. Asked whether the government plans to increase taxes, the prime minister said they will not do such a thing unless they see extraordinary developments in the economy.
The prime minister had recently announced that three “last-minute conditions” were blocking loan talks with the IMF. The fund was asking the government to make the Revenue Administration (GİB) autonomous, to investigate the sources of taxpayers’ income and to cut the amount of money allocated to local administrations. Underscoring that it was impossible for the government to meet such demands, Erdoğan said the government expects the IMF to present new alternatives. “What concerns the government most is whether an IMF deal will be to the benefit of the Turkish economy,” he had emphasized. Turkey is expected to receive around $19-25 billion in loans from the fund should a deal is signed.
source: Today’s Zaman
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