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Monday, 19 March, 2001, 14:17 GMT
Turkey seals new IMF deal
Economy Minister Kemal Dervis
Dervis: I hope we will obtain adequate foreign aid
Turkey and the International Monetary Fund (IMF) have agreed a new economic programme aimed at reviving foreign investors' confidence following the financial crisis last month.

The deal was reached after two days of talks with the IMF official responsible for Europe, and after a meeting with representatives of the G-7 countries.


The positive outcome of these contacts depends on our resolve in implementing the reforms

Kemal Dervis
Economy minister

The IMF has backed the programme and is looking at bringing forward $6.25bn of scheduled loans to Turkey.

"We have reached an agreement on the financial and monetary policies that will be implemented," Turkish Economy Minister Kemal Dervis told a press conference.

Mr Dervis said that Turkey would outline the details of the programme by the middle of April when it would submit a letter of intent to the IMF.

At the press conference, Mr Dervis again stressed that he would push on with economic restructuring including reforms to the banking sector and faster privatisations.

"The positive outcome of these contacts depends on our resolve in implementing the reforms... I hope we will obtain adequate foreign aid with this programme, on which framework we agreed with the IMF," he said.

The program aims to bring annual inflation, which is at 30%, to below 20% by 2002 but Mr Dervis warned it would rise in the next few months.

He expressed hope that economy would recover later this year despite an expected 2% fall in growth.

IMF given assurances

IMF European Department Director Michael Deppler said the Fund might bring forward the release of some $6.25 billion in loans pending to Turkey and allow more flexibility in their use.

"We are looking into questions of advancing the timing of the remaining disbursement," Deppler told a news conference.

He did not say if the IMF would offer Turkey fresh loans.

Deppler blamed the failures of the last IMF programme "on problems in the banking sector".

Istanbul stock market trading board
Shares rose briefly on news of foreign aid
He said the IMF had been given specific guarantees that there would be changes to create a "robust" banking system.

"There's no question that external assistance would help Turkey, and the minister is seeking external support. But ultimately what is going to matter is good policies to keep the thing going well," Deppler said.

After an initial jump of 2.5%, Turkish shares ended 2.75% down on Monday as cautious investors said they wanted to see more details of a framework deal with the IMF.

No aid, no investment

Investors indicated last week that their confidence in Turkey would only be restored once there was an offer of financial help from Western sources.

The financial market's reaction to the package will be judged on Tuesday when the Turkish Treasury will auction around $2.5-3.5bn worth of 3-month debt.

The financial crisis last month resulted from Turkey's inability to meet the demands of a three-year IMF deflation programme.

It was triggered when Prime Minister Bulent Ecevit and President Ahmet Necdet Sezer clashed publicly over the pace of an anti-corruption drive.

The government was force to float the lira, which has fallen by about 30% against the US dollar, and inflation shot up again.

The failed IMF programme had cut inflation to 30% annually, compared with triple digit levels of the 1990s.

Mr Dervis is expected to go the US in late March for talks with US and IMF officials over aid.

Anti-IMF protests

Unions have threatened to oppose any programme that does not look after workers needs and have called for mass demonstrations on April 14 to protest against IMF-inspired policies.

Anti-IMF protestors in Ankara clash with riot police
Unions opposing the IMF economic package clash with riot police in Ankara

Major workers' unions have united under an umbrella group named Labour Platform to protest against the new economic programme.

The unions fiercely oppose any economic measures taken in cooperation with the IMF, saying it would ignore the needs of people suffering from the crisis.

EU reforms approved

Turkish Cabinet on Monday also approved the National Programme of political and economic reforms to prepare the country for EU membership.

The program commits Turkey to political, economic and legal changes aimed at eventually gaining membership in the European Union.

"We have taken the necessary measures to speed up the membership process," Cabinet Minister Rustu Kazim Yucelen said.

Yucelen gave few details on the program, but the Hurriyet newspaper reported the draft version did not cover contentious issues such as granting cultural rights to Kurds, abolishing the death penalty and curbing the military's influence in politics.

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See also:

15 Mar 01 | Business
Turkey seizes troubled bank
14 Mar 01 | Business
Turkey tackles debt-laden banks
05 Mar 01 | Business
Turkey seeks US help
09 Mar 01 | Business
Turkey's plan 'ready in 10 days'
22 Feb 01 | Business
Turkish banks at root of crisis
22 Feb 01 | Business
Turkey currency plunge
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