IMF leaves Turkey with promises of tighter policies

Discussions between Turkish government officials and the IMF mission to Turkey,over the sixth review of the stand-by agreement was completed but the IMF didn't consent to the amelioration of their tight financial policies.

IMF leaves Turkey with promises of tighter policies
The explanatory statement, made after the negotiations, included points in accordance with the demands of the IMF such as extra measures against budgetary expenditures, limiting health spending, returning social security reform to the top of the Parliament's agenda and increasing prices to provide balance in the accounts of state economic enterprises (SEEs). These elements were also accepted as preconditions for the approval of the letter of intent by the IMF's Board of Executive Directors.

Analysts opine that these conditions are not easy to bear for a government preparing to dive into general elections later this year. This may have also prolonged the process of officially closing the sixth review, analysts said.

The process of releasing the stake of credit for the seventh review will open in May and June. This means that the typing of the letter of intent may last for more than a month, which in turn would cause the merger of the two reviews. The situation is not a new one for Turkey, which has  already merged four of the past reviews into two, as social security reform couldn't pass through Parliament. In the announcement released by the treasury Wednesday morning, the talks were defined as "successful," adding that most of the areas covered under the program ended in a compromise. During the meetings with the mission, the 2006 program realizations, recent macroeconomic developments, the 2007 fiscal targets and policies and progress achieved in structural reforms were discussed.

The IMF accepted that Turkey is continuously getting better with respect to macroeconomic indicators such as growth rates, its current account deficit and primary surplus. "In light of these assessments, no change has been made in the macroeconomic framework for 2007," the statement said. During the discussions, the 2007 fiscal projections, risks and possible impact of some recently undertaken initiatives were also discussed. The announcement indicated that steps to increase the effectiveness of health care spending without compromising the quality and easy access to health services were defined clearly. Moreover, the finance ministry promised to be bound by the health spending targets as envisaged by the 2007 program.

Additionally, a mutual understanding has also been reached by both parties on developing solutions that will maintain key targets of the social security reform within the framework of the Constitutional Court decision, and on setting up a timetable for steps that will further bolster and enhance the progress made to date in the tax administration and tax policy reforms. The statement also announced that "in the financial sector reform area, the road map related to the introduction of secondary legislation of the mortgage law and recent developments in the process of Halkbank's IPO have been covered."

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Güncelleme Tarihi: 20 Eylül 2018, 18:16
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