Agreement with IMF will not affect Turkey's credit rating- Moody's

Hurriyet Daily News with wires

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Lindow told the Anatolian Agency, or AA, that the uncertainty in the markets regarding Turkey's decision about an agreement with the IMF was increasing, adding that there was an expectation among investors over the move.  

The Turkish government is in protracted talks with the International Monetary Fund on a lending pact that could be worth as much as $45 billion, seen as crucial to boosting investor sentiment as the economy slides into recession.

The two sides have however failed to seal an accord to replace a $10 billion deal that expired in May 2008. Disagreements over municipal spending have surfaced previously in the talks, which are being followed closely by the markets. An IMF mission is expected to visit Turkey shortly to reconvene discussions a loan program.

Credit rating agencies say that should Turkey decide not to sign an agreement with the IMF, it still would need a new program for medium term economic goals which would meet Turkey's foreign financing requirements of around $20-30 billion, AA said.

Credit rating agencies believe Turkey's economic revival is still dependent on domestic demand, and this could be increased through public finance policy measures. They say in a program that is not supported by the IMF, the priority should be given to domestic borrowing.

Finance Minister Mehmet Simsek said last week Turkey needs to take fiscal measures for this year and the medium term, with or without an International Monetary Fund loan accord, adding further doubt to the future of ongoing loan talks with the Fund.

Central Bank Governor Durmus Yilmaz also said last week that Turkey should prepare an alternative plan if it fails to conclude talks with the IMF, signaling that a deal might not happen.

Business groups have been clamoring for an IMF deal to shield the European Union candidate's export-driven economy, which is expected to shrink some 5 percent this year.