Gov’t admits the hard truth

Bloomberg

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Turkish and IMF officials will probably meet in the next week or two either in Ankara or in Washington, Economy Minister Mehmet Şimşek told reporters in Ankara yesterday.

The revised economic forecasts, including a wider budget deficit and a heavier debt load, show the government is seeking to close the distance with the fund in order to obtain loans that could support the Turkish Lira and increase investor confidence in Turkey. Talks with the IMF broke down in January over spending plans as the global crisis slows growth worldwide.

"We can’t say there’s 100 percent agreement with the fund but the basic approaches are similar and the details will be negotiated," Şimşek said. "I hope the Turkish side of the talks will be finished by the IMF spring meetings" on April 24.

The budget deficit will be about 4.6 percent of gross domestic product this year, Deputy Prime Minister Nazım Ekren said at the joint news conference with Şimşek and Finance Minister Kemal Unakıtan. Government forecasts made in May had predicted a deficit of 1.4 percent.

Spending plans will be reviewed, Ekren said. Turkey will need budget savings of "something over" 0.7 percent or 0.8 percent of gross national product in order to secure IMF lending, Şimşek said.

The widening of the deficit will be a "temporary" departure from fiscal discipline and the government will re-impose expenditure controls in the medium term, Ekren said.