## Press Release: IMF Approves Augmentation of Turkey's Stand-By Credit to US$19 Billion

_IMF News, May 15, 2001_

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## Bibliographic details
- Published: May 15, 2001

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### Approval and Terms
- Executive Board approved augmentation of Turkey's three-year Stand-By Arrangement by SDR 6.4 billion (about US$8 billion), bringing the total to SDR 15 billion (about US$19 billion).
- Immediate drawing available: up to SDR 3 billion (US$3.8 billion).
- Further drawings:
  - SDR 1.2 billion (about US$1.5 billion) each, not earlier than June 25 and July 25.
  - SDR 2.4 billion (about US$3 billion) each, not earlier than September 20 and November 15, following completion of further reviews.
- Background drawings and approvals:
  - Stand-by credit originally approved in December 1999 for SDR 2.9 billion (about US$3.7 billion).
  - December 2000: SDR 5.8 billion (about US$7.3 billion) under the Supplemental Reserve Facility (SRF).
  - To date, Turkey has drawn a total of SDR 3.9 billion (about US$4.9 billion) from the IMF.

### Objectives and Strategy of the Program
- Program aims:
  - Restore macroeconomic stability.
  - Address structural root causes of crises.
  - Lay foundations for resumption of growth.
- Three-pronged strategy:
  1. Structural policies to correct distortions, enhance transparency, and improve governance in public and private sectors.
  2. Fiscal and monetary policies to restore financial stability and facilitate disinflation.
  3. Strengthened social dialogue to promote wage moderation and social protection.
- Emphasis areas:
  - Banking sector reform: elimination of public sector banks' large overnight exposure, full recapitalization, and overhaul of governance.
  - Privatization and market reforms: telecommunications, electricity, natural gas, tobacco, and sugar markets.
  - Governance and transparency enhancements.

### Fiscal and Monetary Policies
- Fiscal policy:
  - Major fiscal effort to re-establish fiscal solvency.
  - New target for the primary surplus of the public sector: 5½ percentage points of GNP in 2001, requiring additional measures amounting to 3 percentage points of GNP.
  - Measures aim to strengthen the primary fiscal position, reduce immediate borrowing requirement, and ensure long-term sustainability of public debt.
- Monetary policy:
  - Adoption of new central bank law to give operational independence in pursuit of price stability.
  - Short term: control of monetary aggregates within a floating exchange rate framework.
  - Transition over time to a full-fledged inflation-targeting regime.

### External Financing and Private Sector Involvement
- IMF providing exceptional financing in support of the program.
- Additional external financing from international financial institutions to fulfill financial requirements and reassure markets.
- Program includes voluntary private sector involvement consistent with authorities' preference for market solutions.

### Projections, Targets, and Expected Outcomes
- Short-run objectives:
  - Cushion short-term macroeconomic impact of the February 2001 financial crisis.
  - Lay foundation for disinflation and growth resumption.
- Growth and inflation projections:
  - GNP growth projected: negative 3 percent in 2001; 5-6 percent annually in 2002 and 2003.
  - CPI inflation projected: 52½ percent in 2001 (December/December) and 20 percent in 2002.
  - Authorities intend to bring inflation to 2 percent a month by the last quarter of 2001.
- Real interest rates: expected to decline from presently very high levels as program and financing take effect.
- External current account: projected to improve markedly due to recession, increased competitiveness, and export acceleration.

### Key Statistics (Table 3: Turkey: Selected Indicators, 1999-2003)
- Real Sector
  - GNP growth rate: 1999 -6.1; 2000 6.1; 2001 -3.0; 2002 5.0; 2003 6.0
  - GNP deflator growth (in percent): 1999 55.8; 2000 51.6; 2001 49.4; 2002 28.3; 2003 16.5
  - WPI inflation (12-month, end-of-period): 1999 62.9; 2000 32.7; 2001 57.6; 2002 16.6; 2003 12.4
  - CPI inflation (12-month, end-of-period): 1999 68.8; 2000 39.0; 2001 52.5; 2002 20.0; 2003 15.0
  - Average nominal T-bill interest rate: 1999 106.2; 2000 38.0; 2001 81.1; 2002 40.6; 2003 32.6
  - Average backward-looking T-bill real interest rate 1/: 1999 25.2; 2000 -11.4; 2001 23.7; 2002 6.9; 2003 13.2
  - Average forward-looking T-bill real interest rate 2/: 1999 32.0; 2000 -6.5; 2001 36.4; 2002 18.0
- Central Government's Budget (in percent of GNP)
  - Primary balance 3/: 1999 1.5; 2000 4.6; 2001 5.1; 2002 5.6
  - Net interest payments 4/: 1999 13.1; 2000 15.8; 2001 20.1; 2002 19.2; 2003 16.1
  - Budget balance: 1999 -11.6; 2000 -11.2; 2001 -15.0; 2002 -13.6; 2003 -10.5
  - Operational balance 5/: 1999 -4.0; 2000 -2.0; 2001 -0.6; 2002 -4.8; 2003 -2.5
- Consolidated Public Sector (in percent of GNP)
  - Primary balance of public sector: 1999 2.8; 2000 5.5; 2001 6.5
  - Net interest payments 6/: 1999 22.1; 2000 21.9; 2001 22.6; 2002 16.2; 2003 13.5
  - PSBR (incl.CBT profits): 1999 24.2; 2000 19.1; 2001 17.1; 2002 9.7; 2003 -12.4
  - Net Debt of the Public Sector (in percent of GNP) 7/: 1999 61.0; 2000 58.4; 2001 78.5; 2002 70.4; 2003 64.9
    - Net external: 1999 19.7; 2000 34.2; 2001 23.5
    - Net domestic: 1999 40.9; 2000 38.8; 2001 44.3; 2002 42.1; 2003 41.5
    - of which: Gross domestic debt of the central government: 1999 42.5; 2000 41.0; 2001 60.9; 2002 57.8; 2003 57.3
    - of which: Auctioned debt`: 1999 25.8; 2000 23.4; 2001 23.2; 2002 32.3
    - For bank recapitalization: 1999 16.7; 2000 17.4; 2001 29.9; 2002 22.9; 2003 19.0
  - Net Debt of the Public Sector (in percent of centered GNP) 8/: 1999 48.6; 2000 50.6; 2001 67.9; 2002 63.8; 2003 60.5
- External Sector
  - Current account balance (in percent of GNP): 1999 -0.7; 2000 -0.9
  - Gross external debt (in percent of GNP): 1999 55.0; 2000 56.6; 2001 66.2; 2002 59.6; 2003 56.8
  - Net external debt (in percent of GNP): 1999 34.0; 2000 37.0; 2001 39.4; 2002 36.2
- Monetary Aggregates
  - Seignorage 9/: 1999 3.2; 2000 1.8; 2001 1.0; 2002 0.7
  - Nominal growth rate of broad liquidity: 1999 100.0; 2000 39.9; 2001 59.5; 2002 29.7; 2003 17.3
- Privatization Proceeds (in millions of US$): 1999 139; 2000 3,273; 2001 3,109; 2002 3,500
- Net External Financing of Public Sector (in millions of US$): 1999 1,417; 2000 4,134; 2001 -291; 2002 1,773; 2003 -938
  - Amortization: 1999 5,971; 2000 6,199; 2001 8,535; 2002 6,927; 2003 8,438
  - Gross borrowing: 1999 7,388; 2000 10,333; 2001 8,244; 2002 8,700; 2003 7,500
    - of which: Eurobond issues: 1999 5,000; 2000 2,500; 2001 4,700; 2002 4,500
- GNP (in trillions of lira): 1999 78,283; 2000 125,971; 2001 182,439; 2002 245,814; 2003 303,626

- Footnotes (as presented):
  1/ Average of monthly nominal T-bill interest rate divided by 12-month past CPI inflation.
  2/ Average of monthly nominal T-bill interest rate divided by 12-month ahead CPI inflation.
  3/ Excluding profit transfers from the CBT, interest receipts, and privatization proceeds.
  4/ Interest payments minus interest receipts plus profit transfers from the central bank.
  5/ Overall balance netted out of the difference between nominal interest payments and real interest payments.
  6/ Interest payments minus interest receipts plus CBT profits before transfers to the government.
  7/ Gross public debt net of the net assets of the CBT.
  8/ Defined as the sum of quarterly GNP in the last two quarters of the year and in the first two quarters of the following year.
  9/ Change in reserve money (currency issued plus reserve requirements) in percent of GNP.

*Press Release No. 01/23, May 15, 2001*

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## References

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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0123_