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Turkey, IMF Discuss Precautionary Stand-By Deal

ISTANBUL/ANKARA (Reuters) -- Turkey is continuing talks with the International Monetary Fund on a precautionary stand-by agreement, Economy Minister Mehmet Simsek said after an IMF delegation left the country.

Turkey's previous $10 billion IMF stand-by deal -- which stipulated conditions related to loans -- expired in May and an IMF team had been in Ankara for post-program monitoring and talks on a possible new deal since mid-October.

Simsek said at a conference in Istanbul that Turkey was positive about a possible deal to anchor the economy and a program may be agreed if differences with the IMF can be overcome.

Separately, a statement from the Treasury in Simsek's name said the delegation had completed talks, focused on Turkey's macro-economic outlook, and left the country on October 29.

It said agreement was reached that the Turkish economy was more resistant to shocks.

"Sustaining fiscal discipline, cautious monetary policy, active liquidity management and structural reforms to maintain improvements in private financing will be important in limiting the impact of global developments on Turkey," it said.

There was no mention in the statement of a possible precautionary stand-by deal that would enable Ankara to gain access to the IMF credit during times of difficulty.

The IMF's Turkey staff team chief Lorenzo Giorgianni said Turkey's economy was more resilient than in the past but would unavoidably be affected by the retrenchment of inflows to emerging markets.

"Buffers in bank and public balance sheets, the flexible exchange rate, and greater diversification of export markets. have increased Turkey's ability to cope with shocks," Giorgianni said in a statement.

Fiscal Policy

Giorgianni said Turkey's fiscal policy should aim to achieve the announced targets of helping rein in financing needs and keeping debt as a percentage of gross domestic product on a downward path.

He said a stronger fiscal performance would be facilitated by a more rules-based fiscal framework, implementing stricter control of local government finances and strengthening tax administration.

Turkish monetary policy should continue to aim to bring down the inflation target, Giorgianni said.

Prime Minister Recep Tayyip Erdogan hinted on October 28 the government may not sign a new loan accord if the global lender exerted excessive constraints on budget spending, tax rates, economic growth, and investments.

Business leaders have called on the government to secure another loan deal to help limit the fallout from the global financial crisis that has already forced Ukraine, Iceland, and Hungary to seek IMF help.

"If the differences between us [and the IMF] can be overcome a program could come onto the agenda," Simsek said.

Turkish markets have tumbled this year, with the main share index XU100 losing more than half its value while the lira has weakened as much as a third against the dollar, heightening market calls for action to support the sharply slowing economy.