Turkey is expected to post a gross national product (GNP) growth of 7 percent in 2000, despite uncertainties, atop IMF official says.
The International Monetary Fund's (IMF) Turkey desk chief, Carlo Cottarelli, told a news conference Tuesday, before leaving Turkey at the end of the third regular review of the stand-by deal.
He said he believed the government's commitment to cool down the economy would continue in the 2001 budget. He said increasing fund cuts on consumer loans was an important sign of the government's commitment to take measures to avoid an overheating in the economy, which he said was important to keep inflation and external accounts under control.
"The program is on track," said Cottarelli, who will visit Turkey again in the second half of October to concentrate on 2001 budget preparation. After approving a supplementary letter of intent to be drawn up at the end of the talks, the IMF is expected to release another $300 million tranche of the $4 billion stand-by arrangement. (US$1=TL666,666)
"The trade-off between inflation and growth would be important if economic policies are not implemented in a decisive way, but the trade-off can be avoided at least for this year because policies are highly credible," he said.
Turkish Treasury Undersecretary Selcuk Demiralp told the same conference that the current account deficit was expected to reach 4 percent of GNP and to stay between 3-3.5 percent in 2001. In the first half the current account deficit amounted to $5.6 billion.
Cottarelli said Turkey met the IMF's performance criteria on fiscal accounts for the second quarter of the year. "The central budget will do better than expected this year," he said. He added, however, that weaknesses in the finances of public enterprises were continuing, which he said was because the government did not reflect rising global oil prices on the domestic market. The government has managed this through a shock-absorbing mechanism launched early in the year and has been slashing taxes on fuel while prices continued to soar.
Demiralp said the tax loss arising from that mechanism would amount to TL500 trillion, but this could be offset by a projected strong primary budget surplus and strong revenues. Cottarelli had earlier advised to abandon the mechanism so as not to distort public finances.
Government to take new measures
In a written statement following a summit meeting of the leaders of Turkey s three-way coalition government Tuesday, Prime Minister Bulent Ecevit said measures would be taken to minimize the effects of soaring global oil prices on Turkey. Ever since the oil prices exceeded the $30 per barrel mark, Turkish economists have been predicting that the government might have to raise oil prices by around 15-20 percent towards the end of September so that the hike does not fuel September inflation.
Still, the Prime Minister stressed that the government would continue using every possible mechanism to prevent the economic program and disinflation package affected from a surge in oil prices.
Cottarelli also said a possible deviation from the privatization target due to the failure to sell off Turk Telekom this year would not endanger the stand-by deal, because privatization is not a separate performance criteria in the program but appears in combination with the primary budget surplus, which he said would be enough to compensate for a shortfall in sell off proceeds.
However, he cautioned that the Turk Telekom sell-off must be accelerated. Ecevit's statement yesterday also said the government would accelerate and conclude the telecom sale as soon as possible. Demiralp said the government was revising its sell-off program, considering that $2 billion in revenue expected from the telecom sale would arrive in 2001.
Businessmen say fine tuning a must
Ecevit's criticism of the IMF on Monday drew reactions from businessmen and business association leaders as well as from nongovernmental organizations (NGOs). While business leaders took a pro-IMF position, NGO representatives expressed their sympathy for Ecevit over his remarks.
Ecevit told a news conference Monday that no international institution had the right to assume the role of state or society and that international institutions should not attempt to dictate wage and income policies to Turkey.
State Minister for the Economy Recep Onal said that Prime Minister Ecevit was pleased that the economy is recovering and that Turkey is producing more. "The prime minister speaks in compliance with the information he receives and his own wishes."
Although Ecevit said he was happy with high growth rates and declined an IMF proposal to cool down the economy as an anti-inflationary check, Onal made no detailed explanation on how to maintain a high growth rate, as mentioned by Ecevit, and disinflationary policies.
The chairman of the Turkish Industrialists and Businessmen's Association (TUSIAD), Erkut Yucaoglu, responded to journalists' questions on Ecevit's statement by saying that the current disinflation program was the Turkish government's.
He told reporters at the Technology Convention in Antalya that IMF Turkey desk chief Cottarelli was only an engineer of the program and that his role was to make suggestions and give technical opinions, as Cottarelli himself said in Antalya last weekend and in Ankara Tuesday before departing from Turkey.
Leading businessman Sakip Sabanci also voiced support for Cottarelli. "IMF prescriptions were prepared in compliance with Turkey's circumstances with no political concern over elections and from a neutral perspective."
He continued: "Of course Turks will solve Turkey's problems. Others cannot interfere and can only make suggestions and proposals. But we were so sick of and ruined by inflation that we had to ask these people for help [from outside]."
Sabanci said that IMF officials working in Turkey were well intentioned and Turkey should tolerate their views in the interests of society. However, against Cottarelli's criticism of the Turkish private sector for giving too high pay rises he said that workers' wages had to be raised because the prices of all other inputs such as oil had also risen.
Another prominent businessman, Halit Soydan, president of Tarisbank, said in Izmir yesterday that Turkey had signed 17 stand-by accords with the IMF since 1960 and that this time it had to succeed.
He has told reporters in Izmir that Turkey should fulfill the requirements of the stand-by deal, not because the IMF so desired but to get rid of the evil of high inflation. Soydan said that no society in the world had suffered such high inflation rates for such a long period. He added that people in their 20s do not remember a time with no inflation.
He added that he was confident that the government would maintain the disinflation program and that the era of high interest rates and making money from money had ended and that now money would be made selling goods.
On the other hand, the chairman of the Turkish Farmers' Association (TZD), Ibrahim Yetkin, blamed Cottarelli for the mistaken economic policies in Turkey and added that he totally supported Ecevit.
He said that no country in the world had defeated inflation with IMF prescriptions. At a press meeting in Ankara, Yetkin said that Cottarelli's objections to increased wages for workers were opposed by Ecevit and that he wanted the prime minister to show the same sensitivity to farmers as well.
He said that the prescriptions which the IMF wanted to impose on Turkey were causing national worries and added that the depression in rural areas was different from that in urban centers and was much more grave. He said that the divorce and crime rates had risen in rural Turkey because of the depressed economy.
Yetkin said that it was hard to believe that Cottarelli was asking for a 12 percent support price hike for next year. He said that farmers wanted a fall in inflation too but were crushed under the contradictions of an economy in which French cheese sells at TL40 million while Turkish cheese remains unsold in warehouses at TL 3 million.
He said that the Turkish farming sector could be saved not by reducing the funds allocated to it, but by giving more support. Meanwhile, opposition True Path Party (DYP) Deputy Chairman Ufuk Soylemez said that Ecevit was the last person to have the right to complain about the IMF.
"This is the government which invited the IMF in, permitted them to open an office in Ankara and which implemented IMF instructions one after the other. They have no right to complain." Soylemez pledged that his party would raise the flag of opposition both inside and outside Parliament against the government's economic mismanagement. –(Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)
