IMF loan may not be necessary

Bloomberg

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Prime Minister Recep Tayyip Erdoğan probably won’t sign an IMF deal so long as it’s able to raise enough money by selling bonds, Ash said in a telephone interview from London yesterday.

"As long as they can fund themselves, why go to the IMF?" he said. "The IMF is willing to lend and in a worst-case-scenario Erdoğan would be willing to borrow, but right now they’ve got an IMF program in reserve and they’ll probably try and manage through."

Turkey has been negotiating an IMF accord for the past year, but the government has yet to invite an IMFteam to Ankara to complete the deal. Turkey’s economy shrank 6.2 percent in the fourth quarter, the first contraction in seven years, and the jobless rate rose to a record 15.5 percent in January.

Turkey will sign an IMF accord only if it’s in the country’s interests to do so, Erdoğan said on April 3. Recent sales of Treasury bills and Eurobonds mean the government is currently meeting its financing needs, Ash said. Turkey has sold $2.5 billion of bonds on the international markets since January, more than half of its $3.5 billion target for the year. The Treasury raised 16.6 billion Turkish Liras ($11.7 billion) in domestic debt auctions on May 4 and May 5, exceeding a goal of 15.3 billion liras for the month. It plans another sale on May 26.

Turkey’s external financing needs are dropping, Central Bank Governor Durmuş Yılmaz said on April 30. Financing the budget deficit is a bigger challenge, Ash said. The shortfall in the first quarter was 19.1 billion liras, almost double the original target for the year.