News Brief No. 00/24

News Brief: IMF Completes Turkey Review and Approves US$293 Million Credit

April 28, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the first review under the stand-by credit for Turkey. As a result, Turkey will be able to draw up to the equivalent of SDR 221.7 million (about US$293 million) from the IMF.

The three-year Stand-By Arrangement was approved December 22, 1999 in a total amount equivalent to SDR 2,892 million (about US$3.8 billion).

In commenting on the IMF Executive Board discussion, Stanley Fischer, Acting Managing Director and acting Chairman of the Board, said:

"The Executive Directors of the International Monetary Fund congratulated the Turkish authorities on the results achieved so far under the disinflation and fiscal adjustment program launched at end-1999. They noted that the program’s policies have quickly gained credibility, as evidenced by the faster-than-anticipated fall in interest rates, the improved access to international capital markets, and the positive response of domestic and foreign investors to the privatization program.

"Progress in strengthening public finances has been impressive. The 1999 fiscal target was met by a wide margin, and developments in early 2000 are fully in line with the strong improvement in the fiscal primary surplus envisaged for 2000. Moreover, the sharp decline in interest rates has lessened the burden of public debt service and improved budgetary prospects further. However, while this decline provides a useful cushion to meet eventualities, economic policies must remain firmly on track.

"Inflation, while still high relative to the annual inflation target--owing partly to one-off factors--has declined steadily since December. Thus, the 2000 inflation target remains feasible as long as steadfast implementation of the program continues. In this respect, the authorities’ commitment to take additional measures, if needed, is welcome. A key contribution to the further fall in inflation will continue to come from the monetary and exchange rate framework introduced in early 2000. The preannounced exchange rate path, coupled with the currency board-style rules on domestic base money creation, has so far been skillfully managed.

"Further progress has been made in the structural reform area since the approval of the stand-by arrangement. The rapid progress in implementing the privatization program bodes well for the attainment of the 2000 privatization target. The appointment of the Board of the Bank Supervision and Regulation Agency is an important initial step in strengthening further the bank supervision system. Looking ahead, the structural component of the program should be further strengthened by the authorities’ commitments under the loans that are being discussed with the World Bank," Fischer said.