Turkey no longer needs IMF loans: Central Bank

Turkey can now dispense with the International Monetary Fund loans which have helped nurse its economy back to health after the deep financial crisis of 2001, the governor of the central bank said on Friday.

Turkey no longer needs IMF loans: Central Bank
Turkey can now dispense with the International Monetary Fund loans which have helped nurse its economy back to health after the deep financial crisis of 2001, the governor of the central bank said on Friday.

But Durmus Yilmaz said that even without a strong guiding hand from the IMF, the country must preserve political stability following Sunday's general election, maintain structural reforms and adhere to fiscal discipline.

"It is not necessary to sign a deal including loans with the International Monetary Fund at the point we have reached today," Yilmaz told a news conference held to unveil the bank's quarterly inflation report.

Turkey's current $10 billion standby deal with the IMF is set to expire next May.

He said Turkey still needed to follow fiscal discipline and and provide its own anchor, which the IMF has provided in the last five years under the government of Prime Minister Tayyip Erdogan's pro-business AK Party.

In Sunday's election, the AK Party scored a strong triumph with 47 percent of the vote which will enable it to form a single-party government. Markets have welcomed the result which should enable the party to push ahead with its reform programme.

"What is important for us is that political stability continues and that structural reforms are sustained," Yilmaz said.

The fall in the Turkish financial markets slowed after his remarks as the lira firmed from a four-week low of 1.318 against the dollar in early Friday trade to 1.3045 at 0847 GMT.

"Rules on the fiscal discipline should be set and implemented in the coming period even with or without the IMF," he said.

Yilmaz said it would be no surprise if Turkey's current account deficit grew in the second half, but that in 2007 as a whole it would be lower as a proportion of gross national product than a year ago.

The current account deficit, a main weak spot of Turkey's fast-growing economy, rose to 7.9 percent of gross domestic product in 2006 from only 0.8 percent in 2002.

The deficit showed signs of easing earlier this year as high interest rates bite into demand for imports.

"It will not be surprising that the current account deficit shows a rising trend in the second half of 2007," he said.

Yilmaz also said the bank saw a slowdown in service prices and an improvement in domestic demand.

The central bank expects the consumer price index to show a gradual decline in the third quarter, he said, as the bank tried to approach to a year-end 4 percent target.

Last month, CPI fell 0.24 percent, for an annual increase of 8.60 percent.

Yilmaz said if interest rates fell in the fourth quarter, he saw inflation at 5.1-6.9 percent at end-2007 and 1.5-4.9 percent at end-2008.

However, he said this should not be understood to mean interest rates would be cut in October.

The bank also had raised its base crude oil price forecast to $65 per barrel from an earlier forecast of $60. Oil prices are a big determinant in the current account deficit and inflation level of import-dependent Turkey.

Reuters

Güncelleme Tarihi: 28 Temmuz 2007, 01:35
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