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Thursday, 26 April, 2001, 18:27 GMT 19:27 UK
Turkey 'to win $10bn rescue package'
Economy Minister Kemal Dervis
Kemal Dervis: announced controversial economic reforms
Turkey's progress in reforming its ailing economy is to be rewarded with $10bn in outside support, reports said.

The International Monetary Fund and World Bank are poised to announce the award of new loans to Turkey, sources say, following talks with the country's economic minister Kemal Dervis earlier this week.

The package has been built on the ashes of a previous $11.5bn loans deal which was derailed in February when the country's second financial crisis in four months prompted the government to float the Turkish lira.

The currency has since lost almost half its value.

And the new loans follow the announcement by Mr Dervis last week of controversial measures, including banking reforms, a 10% cut in public spending and an acceleration of the government's privatisation programme, to shore up the Turkish economy.

While popular with industry leaders, the proposals have been bitterly opposed by unions, which are seeking a more immediate solution to rising inflation and high unemployment.

Extra cash

While the new package has yet to be passed by heads at the IMF, which has yet to hammer out final details with the World Bank, approval is viewed as a formality, an IMF source told a news agency.

The $10bn will be given in addition to the $6.25bn left over from the last IMF loan, the source said.

The news follows comments on Wednesday by Stanley Fischer, first deputy managing director at the IMF, who said that Turkey "deserves the support of the international community, and it will get it".

Mr Fischer said that negotiations over a new IMF/World Bank package for Turkey were "virtually complete, and only final details of the economic programme and the financing remain to be determined".

Recession

The IMF also on Thursday revealed that, thanks to the financial crisis, it expects the Turkish economy to contract by 2.6% this year.

"The situation remains difficult," the IMF said in its latest World Economic Outlook report.

But the IMF said the country's economy would return to growth, of 4.9%, next year.

Inflation, which hit 54.9% last year, will come in at 48.4% this year, and 28.4% in 2002.

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See also:

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