Press Release No. 04/52

Press Release: IMF Staff Statement on the Conclusion of the Seventh Review Discussions under Turkey's Stand-By Arrangement

March 15, 2004

The following statement was issued on March 13, 2004 in Ankara by Odd Per Brekk, the IMF Senior Resident Representative in Turkey:

"An IMF mission headed by Mr. Reza Moghadam has concluded the Seventh Review discussions under Turkey's Stand-By Arrangement with the Fund.¹ The authorities and the mission have now reached agreement on a draft Letter of Intent (LOI).

"The government has reaffirmed its commitment to achieving a 6.5 percent of GNP public sector primary surplus in 2004, and has adopted a package of measures to offset the impact of the recent increases in pensions and minimum wages and of lower tax revenues.

"The Turkish authorities have also formulated a comprehensive structural reform agenda for the remainder of the program period. A key aim of this agenda is to put public accounts on a sound medium-term footing. In this regard, the LOI envisages reforms in social security and tax administration and a review of public expenditures.

"Another important component of the structural reform agenda focuses on banking. The authorities are planning a review of the Banking Act to align supervision and regulations with EU standards, and to strengthen the operations of the BRSA and the SDIF as separate and independent agencies. The LOI also envisages an acceleration in resolution of intervened banks, faster SDIF asset recovery, and pressing ahead with state bank restructuring.

"Building on the recent success, the authorities also intend to accelerate privatization, and have now formulated a detailed strategy for the remainder of the year.

"The agreement is subject to approval by the Fund management and, ultimately, the Executive Board. The Letter of Intent and the actions needed to facilitate the completion of the review are expected to be finalized in the coming days which should enable Board consideration of the review in April. Completion of the review would trigger another disbursement of some US$500 million."