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Turkey: IMF Holding Discussions Amid Financial Crisis

  • Breffni O'Rourke

Turkey is still reeling from the financial crisis that hit it in the wake of last month's open political quarrel between Prime Minister Bulent Ecevit and President Ahmet Necdet Sezer. The financial turmoil forced the government to abandon its currency peg system and let the national currency float, with the result that the lira has fallen sharply. The government has not yet taken any clear action to ease the crisis and its anti-inflation program, backed by the International Monetary Fund, lies in tatters. IMF officials are now visiting Turkey to try to help repair the damage. RFE/RL correspondent Breffni O'Rourke reports.

Prague, 2 March 2001 (RFE/RL) -- Turks are preparing for the Muslim Eid al-Adha religious holidays in the coming week amid a pervading sense of gloom. The financial storm that so unexpectedly hit the country late last month is likely to leave deep scars.

The Turkish lira has lost about 27 percent of its value in little more than a week. Prices of many basic commodities, including gas and electricity, have already risen, and the solvency of the banking system is in some doubt.

At the same time, unemployment is increasing. And businesses are also feeling the strain, with foreign companies reportedly refusing to accept letters of credit given by Turkish firms.

All this comes at a moment when Turkey must soon start servicing heavy debt repayments.

The government, which watched largely helpless as the crisis developed, is now expected to launch a new economic program, with revised inflation targets, after the end of the week-long religious holiday.

Prime Minister Ecevit says he's hoping for a $25 billion loan, apparently from foreign banking consortia and international financial institutions, to help the country overcome its present difficulties.

Two International Monetary Fund teams are visiting Ankara at the moment, the main one led by the fund's Turkish desk chief Carlo Cottarelli. In talks with Turkish officials, they are putting together a series of measures designed to help stabilize the economy. A Turkish financial newspaper ("Finansal Forum") reports the IMF has agreed in principle to extend an unspecified sum of billions of dollars in loans.

But a spokeswoman for the IMF in Washington, Connie Lotze, adopted a cautionary tone in remarks to RFE/RL.

"It's not a matter of talking about more money. It's a matter of talking about what needs to be done in order to overcome the crisis." Lotze said what's needed now, among other things, is a new monetary policy because of the floatation of the lira. She declined to go into detail on the measures envisaged, but she indicated that the IMF is not now considering any entirely new financial package for Turkey.

Lotze noted that three months ago the IMF approved a supplementary reserve fund for Turkey. She said that -- taking into account the reserve fund as well as the original IMF loan -- a package of more than $11 billion had already been earmarked for Turkey. The money had been intended to support the anti-inflation program as well as to help overcome a previous financial crisis, which struck in November.

"Of that [$11 billion package,] about $5 billion was dispersed. So there is still $6 billion which has not been dispersed to Turkey at this point. The discussion at the moment is ongoing, under the assumption that there is still money that was already approved".

Lotze said flatly that the current discussions in Ankara are not looking at any fresh financing. And she added that Turkey still has to meet certain conditions for the already earmarked funds to be dispersed.

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