Press Release No. 05/157

Corrected Press Release: Statement by IMF First Deputy Managing Director Anne O. Krueger on Turkey

July 7, 2005

Ms. Anne O. Krueger, First Deputy Managing Director of the International Monetary Fund (IMF), issued the following statement in Washington, D.C. today about Turkey's program supported by a Stand-By Arrangement from the Fund:

"Turkey's economic and financial performance remains strong: budget execution is on track, the authorities' growth and inflation targets are well within reach, and the Central Bank of Turkey has appropriately taken advantage of strong capital inflows to build reserves comfortably in excess of program target. This performance was noted at the conclusion of the IMF staff mission's discussions for the first review of Turkey's program supported by a Stand-By Arrangement from the Fund (see Press Release No. 05/141). Underscoring the authorities' resolve to keep macroeconomic policies on track, all quantitative targets for which data are available have been met, with the exception of a small deviation in the indicative floor on the social security balance.

"Structural reforms have also continued to be pursued by the authorities. Parliament's recent approval of the banking law, a performance criterion under the Stand-By Arrangement, is a major achievement and should bring Turkey's supervisory framework closer into line with international best practice. This measure together with approval of the landmark pension reform legislation (also a performance criterion) had been identified by the authorities and staff as key policy actions needed to complete the first program review.

"However, the pension reform law could not be approved before Parliament recessed for the summer and IMF management decided to postpone its recommendation that the Executive Board consider completion of the first program review. The implementation of this law is a key component of the program's structural reform agenda and is needed at an early stage to bring Turkey's social security deficit under control.

"The authorities are determined to extend Turkey's strong economic performance by implementing in full their ambitious reform program. The near-term priorities under the authorities' program include: passage of the pension legislation and associated administrative reform law as soon as Parliament reconvenes; reform of income taxes; implementation of measures to strengthen tax administration; establishment of a framework for dealing with social security arrears; technical preparations by the Central Bank of Turkey to implement inflation targeting in January 2006; and continued implementation of the ambitious privatization program, including for state banks.

"IMF Management and the staff remain in close dialogue with the authorities and continue to support them in their efforts to implement the reforms agreed under the program."