TURKEY: Turkey, IMF Disagreed over Possible Extra Revenue From Growth’

Turkish Deputy Prime Minister Ali Babacan revealed on Wednesday why Turkey and the International Monetary Fund (IMF) failed to reach an agreement on a stand-by deal, saying one of the details on which there was disagreement was over the distribution of additional revenue if Turkey surpassed its growth targets in 2010.

In an interview with CNN Turk, Babacan said the fund had recommended that Turkey revamp the Revenues Administration (GİB) to bring about a structure similar to the Banking Regulation and Supervision Agency (BDDK) and control municipal spending but that only the latter recommendation was the subject of reform. He added that the Turkish government had not accepted the recommendation on the GİB and that this was dropped in the stand-by discussions at the end of last year.

The government and the IMF agreed to end discussions on a stand-by deal that would renew a previous one that ended in May 2008 as it was deemed unnecessary, though disagreements between the two parties did slow down the process. The new deal was expected to bring more than USD 20 bn to Turkey.

Regarding the two-year period of discussions with the IMF, Babacan stated that the two sides could not agree on “what was right,” and that by the end of last year there were no more topics that could bring about an agreement on a possible stand-by deal.

Babacan stressed that one of the main topics that the two parties couldn’t agree on was spending of extra government revenue stemming from the possibility of higher than expected growth in the Turkish economy this year. The government in its Medium-term Economic Program (OVP) expects a gross domestic product (GDP) growth rate of 3.5 percent this year.

Regarding the question of added credibility originating from a new stand-by deal with the fund, Babacan stated that although this credibility would have assisted Turkey near the beginning of the crisis, at the current point it would not do much to bolster confidence in the economy. He stated that market analysts had changed their opinions about a new IMF deal in the past few months, stating that it was unnecessary.

Source: Today's Zaman