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The BBC's Chris Morris
"It is not clear where the money would come from"
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Wednesday, 28 February, 2001, 16:34 GMT
Turkey hopes for $25bn loan
Bulent Ecevit at meeting of Democratic Left party
PM Ecevit says he will not resign over the crisis
Turkey is hoping for a $25bn loan from a group of foreign banks to help it weather its latest economic crisis.

The country is in the midst of re-working an economic programme sponsored by the International Monetary Fund to combat inflation and reform its banking sector.

The programme was derailed by Turkey's decision last week to devalue its currency. Prior to the devaluation of the lira, exchange-rate controls were being used to help reduce inflation.

A souvenir shop in Istanbul
Only tourists in Turkey are benefiting from the devaluation of the lira
Addressing speculation that Turkey was negotiating with foreign banks for a loan, Prime Minister Bulent Ecevit said "this is our expectation, our wish".

His comments come as Turkey faced a 10% rise in fuel prices, following the depreciation of the lira by 28%. Some fruit and vegetables, such as green peppers, have risen by 150-200% in price.

Past loans

Turkey has already taken out a $1bn loan from a consortium of foreign banks in November during an earlier financial crisis.

Then in December, the IMF lent the country $7.5bn in new loans. The Fund also brought forward nearly $3bn in loans that were available to Turkey under a previous deal.

If I leave office now and cause a government crisis under the circumstances we are in, I would not be able to account for it before the nation

Bulent Ecevit
Prime Minister
Turkey's most recent crisis has been sparked by a public row between Mr Ecevit and President Ahmet Necdet Sezer on tackling corruption in the banking sector.

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

Relations between the two men have since appeared to ease following a face-to-face meeting on Monday.

Banking casualty

In a sign that Turkey is keen to continue solving problems in the banking sector, the local regulator on Wednesday took control of a small private bank called Ulusal Bank.

The Turkish Banking Supervisory Board said Ulusal Bank can no longer fulfil its obligations, and that its debts exceed its assets.

The bank is the 12th bank to collapse in Turkey within two years.

The country's previous financial crisis in November was prompted by the collapse of 10 insolvent private banks and fears that much of the sector was under threat.

Corruption and instability in Turkey's banking sector has long been the economy's Achilles heel.

New central bank chief

Turkey is also on the verge of appointing a new chief for its central bank, after the former governor Gazi Ercel resigned on Sunday.

Local media in Turkey report that Kemal Dervis, a World Bank official, has accepted the job.

Mr Dervis has been with the World Bank since 1978 and is vice president for poverty reduction and economic management in Washington.

He was also an academic and adviser to Mr Ecevit when he was prime minister during the 1970s.

IMF talks continue

Talks between Turkey, the IMF and the World Bank on revising the economic programme continue.

A conclusion is not expected for a couple of weeks, despite growing frustration in the financial markets and from the general public.

The IMF is not expected to give Turkey further loans, despite initial hints from Horst Köhler, managing director of the IMF, that Turkey could be given further "resources" to cover the cost of restructuring the banking sector.


Turkish labour unions and business groups on Wednesday threatened widespread protests if they were not consulted on the economic policy being developed with the IMF.

Protests in Samsun
Civil servants protest against the IMF in Samsun
There have already been protests in Ankara and other parts of the country as many blame the IMF for the country's problems.

Despite calls for his resignation, Mr Ecevit remains defiant that he will stay in government.

"It wouldn't be difficult at all for me to pull out of the government," Mr Ecevit told his Democratic Left Party.

"But if I leave office now and cause a government crisis under the circumstances we are in, I would not be able to account for it before the nation and before history."

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See also:

28 Feb 01 | Business
Turkish air sell-off delayed
27 Feb 01 | Business
Turkey re-works economic plan
22 Feb 01 | Business
Turkish banks at root of crisis
06 Dec 00 | Business
IMF agrees Turkish loans
15 Jan 01 | Country profiles
Country profile: Turkey
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