IMF talks at advanced stage

Bloomberg

The fund is demanding, "significant fiscal adjustments," from Turkey and agreement will depend on whether the country can "persuade" the fund on certain areas, Şimşek told reporters in Ankara. He did not give any details and said he could not predict when negotiations will conclude.

The government’s spending plans for the next year are based on a forecast that the economy will expand by 4 percent, helping to boost tax revenue. That is more than double the 1.8 percent growth forecast by businessmen and economists in the Central Bank’s latest survey.

The budget, being discussed in parliament this week, forecasts tax revenue will increase 16 percent. The economy grew at its slowest pace in six years in the second quarter of this year and industrial output declined the most since 2002 in September. The global credit crunch is reducing the flow of foreign investment Turkey is accustomed to, financing annual gross domestic product growth of almost 7 percent over the past six years. The YTL has lost about 19 percent of its value against the dollar since the start of October.

Talks with the fund have not yet produced a result, Prime Minister Recep Tayyip Erdoğan said yesterday in televised remarks. Turkish policies should "internalize the challenges posed by the difficult global environment," the fund said in a statement Oct. 30 after a visit to Turkey.

"An IMF program might bring relative confidence to the country and could improve the availability of financing as well as limiting portfolio outflows," Tevfik Aksoy, an economist for Morgan Stanley & Co., said in a research note Wednesday. He forecast a financing shortfall in 2009 of, "some $10 billion, which could either lead to a decline in foreign exchange reserves, a depreciation of the currency, or both, unless it is bridged by an anticipated IMF loan."