Monday, 13 April 2009Turkey's State Minister Mehmet Simsek said on Sunday that Turkey and the International Monetary Fund (IMF) had agreed on a "set of principles" to guide negotiations for a new three-year loan arrangement, but the two sides hadn't reached a preliminary deal.
In a telephone interview with the Wall Street Journal, Simsek said Turkey was looking for the IMF to be "flexible" in negotiations, which involved how much Turkey would cut spending and how it would revamp its tax system. Simsek wouldn't disclose the size of the loan Turkey is seeking.
At the G-20 summit in London on April 2, "we gave the IMF more resources and told the IMF it needs to be equipped with a more flexible tool kit," Simsek said. "We're hoping that the IMF will be more reasonable, taking into account the extraordinary circumstances Turkey is facing."
Simsek said Turkey still had hard bargaining ahead which might take until the end of the month to conclude. "An agreement hasn't been sealed," he noted.
During negotiations in January, he said, Turkey had agreed to reduce its fiscal deficit by between 0.7 percent and 0.8 percent of GDP. Those talks were suspended until after local elections on March 29, and were picked up again at the G-20 meeting.
Since January, Turkish government revenues have plunged. Simsek said that IMF was pressing Turkey to remake its tax audit and tax collection systems. Turkish taxes depend too much on sales taxes and other consumption taxes and not enough on personal and corporate income taxes, Simsek said.
Simsek noted that the U.S., China and Western European countries had been trying to "spend their way" out of the downturn through fiscal stimulus and deficit spending, but that option wasn't available for Turkey. He said the country, with about 68 billion USD in foreign reserves, couldn't finance such a strategy.
"We cannot just increase our budget deficit; that would increase external financing needs," he said.
Simsek said that Turkish companies were suffering from a sharp reduction in foreign capital flows. "Pessimism is contagious. Turkish banks with good fundamentals won't lend and households with low leverage won't spend."
An IMF loan "would help ease concerns about external financing," he said |
Monday, 13 April 2009
ANKARA (A.A)
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