Turkey re-works economic plan

Police arrest civil servants protesting in Samsun

Turkey's government battled to restore its credibility on Tuesday as it worked behind the scenes to revamp its economic policy.

Finance Minister Sumer Oral said that Turkey was still committed to its three-year economic programme backed by the International Monetary Fund, despite devaluing its currency last week.

The devaluation effectively undermined a central plank of the IMF programme to combat high rates of inflation in Turkey.

The markets are still waiting for a package, a plan 'B' from the government

Burak Akbulut
Bayindir Securities

However, Turkey's efforts to get economic reform on track have been greeted with some scepticism.

"The markets are still waiting for a package, a plan 'B' from the government," said Burak Akbulut, a strategist with Istanbul's Bayindir Securities.

"It's been almost a week that we haven't heard anything clear from the government in terms of what the monetary policy is going to be in this new environment."

Protests

In Ankara, 49 people were arrested for protesting against the IMF, which many now blame for the country's latest problems.

A further 17 people were detained for staging a similar protests in Samsun, near the Black Sea.

Public demonstrations without the permission of the police are illegal in Turkey.

The country's economic crisis was sparked last week by a public row between its president and prime minister on tackling corruption in the banking sector.

The argument prompted a loss of confidence in Turkey's financial markets as foreign investors pulled their money out of the country.

However, relations between President Ahmet Necdet Sezer and Prime Minister Bulent Ecevit appear to have eased following a National Security Council meeting on Monday.

The men came face-to-face for the first time since the argument. Afterwards, Mr Ecevit said, "It was a fruitful and very useful meeting."

Economic targets

Mr Oral said on Tuesday that a technical team was working on changes to Turkey's macro-economic targets but added there was no immediate need for a revision of the 2001 budget.

The government has already announced that it will revise upward its current inflation targets of 10-12%. Inflation currently stands at an annual rate of about 30%.

The World Bank announced on Tuesday that it too was working closely with Turkish authorities and the IMF on a revised economic framework.

Soothing the markets

Mr Oral also said that his priority was to stabilise the financial markets.

Turkey's central bank again intervened in the markets on Tuesday to lower bank lending rates and ease the pressure on the lira.

Interest rates are now at about 100% in contrast to rates of 5000% at the height of the crisis.

The lira has recovered slightly this week, with a current depreciation of about 28% since the float. Last week it fell about 36% in its first two days of free trading.

Central bank and Treasury chiefs

The markets are also waiting to hear who will succeed the former central bank governor Gazi Ercel and the Treasury undersecretary Selcuk Demiralp.

Mr Ecevit hopes to appoint a new central bank chief by the end of the week

Mr Ercel and Mr Demiralp, who were both architects of Turkey's disinflation and the IMF reform plan, resigned earlier this week.

Prime Minister Ecevit said on Tuesday that he hoped to replace them by the end of the week.

A week-long official holiday for a religious festival starts on 3 March and the country will effectively grind to a halt until markets re-open on 12 March.

Mr Ecevit also reiterated in parliament on Tuesday that he would not be replacing any of his ministers.

Turkish shares fell 2.41% on Tuesday. Dealers said investors had rushed to cash in on profits ahead of the national holiday.