'Worst over' for Turkey

Dervis: "The worst is over"

Turkey has overcome the worst of its economic crisis, including the deepest recession since 1945, Turkish economy minister Kemal Dervis has told BBC News Online.

"Usually currency markets are a good indicator of market sentiment, and the Turkish Lira has appreciated considerably, about 18% in the past two and a half months," Mr Dervis said.

I'm really concentrating on making the policies successful and have no thoughts about entering politics

Kemal Dervis

"I think the worst is indeed over."

His optimism comes ahead of a long-expected decision by the International Monetary Fund (IMF) over a $12bn, three-year standby loan package on Monday.

Mr Dervis did not speculate on whether the IMF will approve the new loan, but the Fund's managing director Horst Koehler said on Sunday at the World Economic Forum that he would favour approval.

Political ambitions

Turkey was forced to abandon a currency peg amid politically-fuelled financial turmoil a year ago.

The economy went into steep decline, contracting 8%, leading to hundreds of thousands of job losses and soaring inflation.

Mr Dervis said Turkey has changed and that politicians across the board had been supportive of his economic restructuring.

"Our aim is to become like Italy 10 to 15 years ago," he said.

"There were lots of political changes - a degree of political instability - but economic management was stable and Italy became one of the most prosperous countries in the world."

Mr Dervis was drafted in as economy minister from his job at the World Bank after the crisis struck, but he says he has no ambition to run for office.

"I'm really concentrating on making the policies successful and have no thoughts about entering politics," he said.

New money?

The IMF money is needed to help Turkey pay for its big domestic debt load.

"We have high debt accumulated over a lot of years and a lot of that is quite expensive short term, and interest rates can be very high," said Mr Dervis.

"The IMF has low interest rates and maturity over four to five years, so what we are doing is substituting better funding for expensive short term funding."

The conditions the IMF may attach to any new money, which comes on top of an existing $19bn deal, making Turkey the fund's biggest borrower, may be telling.

Mr Dervis said Turkey had met all IMF requirements and introduced major reforms to the financial sector, including making the central bank independent and promising an austere budget.

"We have had a tough year, but through stringent fiscal policy, the new floating exchange rate regime, and extensive structural reforms, we have come out of intensive care unit," Mr Dervis said.

"It doesn't mean the problems are over but the challenges are over," he said.

Future issues

Turkey's strengthening lira may be one of those problems, which Mr Dervis last week suggested could start hurting exporters.

"Exports grew by 14% in 2001 when the world economy was flat," Mr Dervis said.

"Turkey needs to grow at about 6% to 7% and we need foreign investment to help create the jobs," he added.

But it might also help Turkey's international credit rating which would lower the cost at which it borrows internationally.

Turkey has also indicated it will probably hold off the privatisation of firms like Turk Telekom and Turkish Airlines, blaming the global economic slowdown, until 2003.

Previously, privatisation of state-run industries had been a key IMF criterion for further funding.