End of 2009: Turkey saying goodbye to IMF?

“Prime Minister Recep Tayyip Erdoğan was ‘smart’ not to sign an International Monetary Fund [IMF] stand-by agreement.”

This remark belongs to Professor Steve Hanke of The Johns Hopkins University department of applied economics and is shared by more people in Turkey today. Looking at the current picture, comments suggesting that a deal with the fund is no longer -- and should not be -- on Turkey’s agenda, as the country has left the worst of crisis behind, are heard more and more often even among business circles that were keen to see a deal.

Having successfully completed the 20th stand-by deal with the IMF in May 2008 for the first time in its 50-year history with the fund, Turkey commenced talks for a new deal with the fund in January, seeking help to weather the global financial credit crunch. The decision by the government to start talks for a stand-by deal was welcomed by some economists and business associations that had been urging Ankara to sign a new deal. Among these, such business circles as the Turkish Industrialists and Businessmen’s Association (TÜSİAD) were relatively more eager to see the government sign a deal with the fund, expecting to get their share of an anticipated sum of some $35 billion.

However, much has changed over the months as Turkey strengthened its hand in the face of the crisis more quickly than anticipated, leading to a decline in the need for IMF support. Following the end of the first half, it became more obvious that a deal with the IMF was not as vital as before for Turkey because the country has managed to withstand the crisis thanks to a strong banking sector and a number of stimulus packages.

Turkey has already announced its 2010-2012 program and clarified the road in terms of growth outlook; the budget drafted for the next year does not foresee any financing from the fund. Turkish Central Bank Governor Durmuş Yılmaz recently said the bank has not taken an IMF stand-by agreement as a parameter when drawing up projections and devising monetary policy for the coming year. Also taking earlier government remarks in which it said it did not plan a medium-term program taking an IMF deal into consideration, one could easily conclude that a deal with the fund is no longer a realistic option. Not to mention some of the key sticking points in negotiations with the IMF for a new stand-by agreement, such as giving autonomy to the Revenues Administration (GİB), the government also grew less enthusiastic about shaking hands with the fund as time passed.

As analysts note, Turkey today needs to further focus on structural reforms in its economy and show the IMF that the country does not need the fund’s services.

Source: Sunday's Zaman.
Link: http://www.sundayszaman.com/sunday/detaylar.do?load=detay&link=196748.