An International Monetary Fund (IMF) mission team has completed its discussions for the fifth review under Turkey's stand-by arrangement with the Fund. The Turkish government and the mission have reached an agreement on policy actions needed to complete the review. This agreement is subject to approval by IMF management and, subsequently, the IMF Executive Board.
The fifth review discussions began in May during an earlier visit by the IMF team. The Fund’s stand-by arrangement supporting Turkey's economic program covers 2002-04. Of the total $17.5 billion financing, about three billion dollars are left to be distributed. Completion of the review would trigger a disbursement of about $500 million.
The discussions focused mainly on achieving 6.5 percent of GDP primary surplus in 2003, and advancing the government's structural reform agenda. The government has now identified the measures needed to safeguard the public sector primary surplus target for 2003. Implementation of these measures will help ensure debt sustainability, and facilitate further reductions in government bond rates.
The government is also accelerating a number of structural reforms, including the passage of bankruptcy reform and social security legislation, strengthening the collection of social security arrears, and preparing a comprehensive framework that will strengthen the preparation, execution and control of the government budget.
The macroeconomic environment in Turkey continues to improve. All monetary targets for April and June were met, and the fiscal targets for April were also met. Economic growth in the first quarter exceeded seven percent, suggesting that the government's five percent real GNP growth projection is readily achievable.
In June, consumer prices actually fell, bringing the 20 percent inflation target for 2003 well within reach. With inflation expectations falling, and the government showing its commitment to fiscal discipline and structural reform, the Central Bank of Turkey has been able to cut its short-term interest rate. Continued strong policy implementation by the government should allow government bond yields to fall as well.
Implementation of the agreed measures would pave the way for the IMF Executive Board to consider the fifth review. The meeting could take place ahead of, or just after, the Board's annual recess between August 4 -15. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
