Press Release No. 03/168

Press Release: Discussions for the Sixth Review of Turkey's Stand-By Arrangement to Start on September 25

October 15, 2003

The Turkish economy is on the right track, demonstrating that the economic program is working. Interest rates have come down significantly, and the Turkish Lira is stable. The projected economic growth of 5 percent for 2003 is well within reach, and the inflation target for the end of the year, of 20 percent, is also achievable provided that the program remains on track. The stated intentions of the government, and by Prime Minister Erdogan himself, to stick firmly to the economic program and to complete the 6^th SBA review expeditiously, are encouraging.

The mission discussions will focus on the implementation of the 2003 government budget, and on the preparation of the 2004 budget including the concrete steps that the government intends to take in order to stay with the program's budget targets. They will also cover a range of structural reforms that the Turkish authorities aim to complete in connection with the 6^th review, as laid out in the Letters of Intent. These reforms include preparation of legislation to complete direct tax reform, with the final step focusing on streamlining tax incentives; passage of a new budget systems law (the Public Financial Management and Control Law); reduction in the number of redundant positions in state economic enterprises in line with the targets; passage of legislation to strengthen the BRSA's effectiveness; approval of a privatization plan for Türk Telekom; and adoption of a strategy for reducing tax wedges and other distortions that contribute to high borrowing costs for firms and households.

With continued reform efforts by the Turkish authorities, the Board meeting for the completion of the 6^th review could be held in late October or early November. Completion of the review would trigger another disbursement of IMF financing of close to US$500 million.