Turkey and the IMF
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Statement by IMF Managing Director Rodrigo de Rato at the Conclusion of His Visit to Turkey
"First, I would like to thank Prime Minister Erdoğan for inviting me to today's Investment Advisory Council meeting. I would also like to thank the World Bank and the Turkish Treasury for helping organize today's event.
"I am particularly pleased to be here at the moment when Turkey and the IMF are entering an important new stage in their relationship. As you know, the Turkish authorities earlier this week signed a Letter of Intent for a new three-year stand-by arrangement with the Fund, and it is my expectation that the IMF's Executive Board will consider this request on May 11.
"We have had an extremely productive and constructive dialogue today on Turkey's economy and on the prospects for foreign direct investment. I believe that, with the right policies in place, the outlook is extremely good.
"One of the key drivers of foreign direct investment is economic stability. Here, I am happy to report that this government's program, implemented with the support of the Fund, has produced the best economic performance in a generation: (i) over the last three years, output growth has averaged almost 8 percent a year, and last year even approached 10 percent; (ii) inflation is down below 8 percent, its lowest in 35 years; (iii) the government outperformed on its fiscal target for last year, achieving a primary surplus of almost 7 percent of GNP; and (iv) government debt has been falling steadily.
"I welcome the prospect that the new Fund arrangement will sustain this performance.
"With the achievement of economic stability, the government's commitment to openness and reform, and the prospects for EU accession, foreign direct investment is set this year to break all records. We are seeing a surge of investor interest, especially in the banking and telecommunications sectors. And the government's ambitious privatization program should provide a further spur to foreign investment.
"Today's meeting concentrated on what needs to be done for this expansion of foreign direct investment to be sustained. Everyone agreed that the priority should be to maintain economic stability.
"First, this means sticking with the large government primary surpluses and skillful conduct of monetary policy we have seen in the last three years. This is demanding, but it is the only way to deliver low inflation, low interest rates, and sustained growth.
"Second—and this is where I believe today's Investment Advisory Council has made a major contribution—Turkey needs to continue to improve its business climate. The macroeconomic transformation of the last three years now needs to be taken to the microeconomic level, to the way that business in Turkey operates.
"Finally, Turkey needs to entrench its economic reforms and ensure that they are irreversible. In this regard, I am encouraged by the government's resolve to put in place landmark banking and social security laws. Delivering on the promise of European Union accession and successfully implementing the government's new policy agenda should help make the reform process irreversible.
"With these steps in place, I am confident that the upsurge in foreign direct investment we are witnessing this year will be sustained and will continue," Mr. de Rato said.
IMF EXTERNAL RELATIONS DEPARTMENT