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Wednesday, 12 December, 2001, 12:14 GMT
Turkey passes 2002 budget
Flag seller in Istanbul
A new loan would come on top of previous assistance
Turkey's hopes of getting a new loan from the International Monetary Fund (IMF) have received a boost after the parliament has passed the 2002 budget for the country's Finance Ministry.

Turkey has promised the IMF to slash spending and raise revenue in a bid to get a new loan that would help it sort out its domestic debt problems and lift the country out of its worst recession since 1945.

Ankara is ready to reform the country's tax system and improve spending management, and it is working hard to attract more investors into the country.

Pushing through the Finance Ministry's tight fiscal plan is seen as key to reaching agreement on the country's overall budget.

The parliament will debate each ministry's budget separately before voting on the overall 2002 budget on Wednesday.

However, in the end Turkey's overall budget is expected to mirror that of the Finance Ministry.

IMF watches closely

Turkey's budget debates are closely watched by an IMF delegation which is currently in Turkey.

Both Ankara and the Fund are in talks to finalise conditions on a fresh $10bn (7bn) loan this week.

The loan would come in addition to a $19bn rescue package granted by the IMF earlier this year.

Tax amnesty proposed

In attempt to transfer billions of dollars from the country's "black" economy to the official system, Turkish Deputy Prime Minister Mesut Yilmaz proposed a tax amnesty next year.

It is not clear whether the IMF would support the move.

The idea has been tried before, in 1998.

At the time, Turkey's tax authorities agreed not to ask any questions about any wealth deposited at Turkish banks or invested in Turkish securities during a 24-hour period.

The supporters of the move hope that the amnesty would help markets that are currently dominated by state borrowing to attract fresh cash.

The opponents argue that the knowledge that an amnesty is coming will only encourage widespread tax evasion in Turkey, and this would eat into the government's earnings.

Tight budget

The 2002 budget puts tight controls on state spending, particularly wages for state employees and aims to slash inflation to just over 30% by the end of next year.

The measures should help boost growth to 4% in 2002, compared to a sharp fall in output this year when the economy is expected to shrink by 8.5%.

Turkey's budget deficit should also fall, to below 10% of the country's gross national product (GNP), while public sector revenues before debt payment should reach 6.5% of GNP.

Turkey's stock market rose on the news that the budget was approved amidst high hopes that the government's negotiations with the IMF are about to completed.

IMF officials said earlier that the country is starting to climb out of its disastrous recession and the government is ready to set in motion the Fund's proposed reforms of the banking sector, along with widespread structural and fiscal reforms.

See also:

16 Nov 01 | Business
Turkey close to new loan
13 Nov 01 | Business
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30 Oct 01 | Business
Turkey awaits IMF funds
17 Sep 01 | Business
Turkey rattled by conflict fears
31 Aug 01 | Business
Turkey's economy shrinks
13 Jul 01 | Business
Turkey cheers loan resumption
20 Jul 01 | Business
HSBC buys insolvent Turkish bank
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