NEWS / Foreign Exchange

Turkey-IMF...

An IMF team left Turkey after saying the government must first improve the finances of its state companies to meet fiscal targets before completing the review. The IMF has said that it will not complete the review unless the government takes measures such as hiking electricity prices to meet the government's high primary surplus target. After the departure of the IMF team, the Economy Minister, Ali Babacan, told that they will take some measures to curb government spending to meet fiscal targets. Despite the approaching elections, Babacan said the government would introduce savings within a few weeks equal to 0.6% of the GNP, though he added they would not include cuts in health expenditure. He also said the government would consider raising prices of state companies' products in order to improve their finances only as the final option. Babacan affirmed that Turkey expects a total public sector primary surplus of 6.8% of GNP in 2007, slightly above the target of 6.5%. Babacan also said an initial public offering of state-owned Halkbank may be one or two points below the 25% previously announced.

Babacan stated that the government would resubmit a much delayed social security reform package to Parliament after the general election, set for November. The government had already delayed implementing the reforms until July 1 after a Constitutional Court veto forced it to revise the package. Babacan said he expected the IMF's sixth review to be completed in May. Two more reviews were scheduled for this year and a final one in 2008 when the existing stand-by accord expires. The fund is expected to release a USD 1.125 billion loan tranche after the current review.