Statement by the IMF Mission to TurkeyPress Release No.08/265
October 30, 2008
A staff team from the International Monetary Fund (IMF), led by Lorenzo Giorgianni, held discussions with the Turkish authorities and private sector representatives in Ankara and Istanbul during October 16-29 in the context of Post-Program Monitoring (PPM)1 .
The discussions were held against the backdrop of heightened risk aversion and financial market turmoil in emerging markets and advanced countries alike. The mission focused on the implications of global deleveraging for the Turkish economy and on the appropriate policy responses to minimize disruptive effects. At the conclusion of the mission, Mr. Giorgianni made the following statement:
"The Turkish economy is more resilient today than in the past, but will unavoidably be affected by the retrenchment of inflows to emerging market countries. Buffers in bank and public balance sheets, the flexible exchange rate, and greater diversification of export markets have increased Turkey's ability to cope with shocks. However, its dependence on external financing exposes the economy to the effects of the global credit crunch.
"Macroeconomic policies should internalize the challenges posed by the difficult global economic environment. Specifically, (i) fiscal policy should aim to achieve the announced targets to help rein in financing needs and keep the debt-to-GDP ratio on a downward path; (ii) stronger fiscal performance would be facilitated by continued structural fiscal reforms, including by adopting a more rules-based fiscal framework, implementing stricter control of local government finances, and strengthening tax administration; (iii) monetary policy should continue to aim to bring inflation down to target. To this end, second-round effects of lira depreciation on inflation should be offset promptly; and (iv) tight oversight of the financial sector and flexibility in tackling potential liquidity pressures are warranted. From this perspective, the Central Bank's recent moves to enhance its liquidity management toolkit is welcome," Mr. Giorgianni said.
1 PPM is enhanced surveillance for member countries with outstanding debts to the IMF of more than 100 percent of quota. The next mission to Turkey under PPM is expected in the Spring of 2009.