ANKARA - State Minister Ali Babacan said on Saturday that the new repayment plan of International Monetary Fund (IMF) loan meant a relief of 11 billion U.S. dollars in the debt service in the following two years of time.
Babacan held a joint press conference with Treasury Undersecretary Ibrahim Canakci and Central Bank Governor Sureyya Serdengecti and evaluated the fifth review and the new repayment plan of IMF loans.
State Minister Babacan said that the new repayment plan which would relieve the finance program of 2004 and 2005 at great extent and overcome indefiniteness, would mean 4.5 billion U.S. dollars of reduction in repayment in 2004 and 2.3 billion U.S. dollars of reduction in 2005.
Babacan went on saying, ''according to IMF practices, the countries can repay the IMF loan a year before their normal repayment period. Within the framework of this implementation, our country was to pay back 9.7 billion U.S. dollars in 2004 and 10.1 billion in 2005. But, the countries can repay their debts in the normal repayment period if they don't think it is appropriate to pay back the debt a year before the normal period in line with balance of payments and public finance. I had expressed to the fund administration in mid-July our intention to pay back a part of the debt early and the remaining part in normal time.''
''We will pay back 5.2 billion and 7.8 billion U.S. dollars in 2004 and 2005 according to this new repayment plan. There will be 4.5 billion U.S. dollars of reduction in our repayment in 2004 and 2.3 billion U.s. dollars of reduction in 2005. When we take into consideration that the 4.5 billion U.S. dollars of decrease to be provided in 2004 will continue for two years, this will mean a relief of 11 billion U.S. dollars in debt service in the following two years of time,'' Babacan said.
Babacan stated that the repayment plan had been determined for only 2004 and 2005 at the moment, adding, ''Turkey has the right to change early repayment plan with the normal repayment plan in coming years.''
BABACAN: POSITIVE DEVELOPMENTS GAIN SPEED ESPECIALLY IN RECENT PERIOD WHEN MACRO ECONOMIC INDICATIONS ARE EXAMINED
Babacan said that the government gave a comprehensive information regarding economy policies and showed its determination in economic program one more time with the letter of intent announced on Friday.
Noting that completion of the fifth review successfully reinforced the positive atmosphere in economy in recent period, Babacan said that in spite of all negative criticisms, the government showed its determination to fulfil economy policies one more time. He added that completion of fifth review activities should be accepted as the evidence of their success in economic management and also healthy functioning of parliamentary democracy.
Babacan said that the ratios of capacity usage in manufactures industry production and growth expectations were indicating that they could easily reach the growth of gross national product worth of five percent which was the year-end target.
Noting that the care of government in financial discipline gave an important support to the effort of Central Bank in fight against inflation, Babacan said that the inflation expectations of private sector were getting closer to inflation target of 20 percent every month.
Emphasizing that when foreign balances were examined, it was seen that both import and export rates were increasing, Babacan said that increase in import in a period, when economic activity was fresh and Turkish Lira was gaining value, was an expected development and recovery in export performance was a pleasing situation in such a period.
Babacan said that the most important element which was the source of these evaluations was their determination in public finance. He added that they would not make any concessions of their year-end non-interest surplus target of 6.5 percent.
Babacan said that they reached the target of performance criteria for April and the indication for May within the program for total public balance, however according to their estimation for the end of year, there could be a declination from non-interest surplus target nearly 2.3 quadrillion Turkish Liras. He added that they took a series of measures and implemented them to compensate this possible declination and assure year-end non-interest surplus target.
BABACAN: DEVELOPMENTS IN CAPITAL INFLOW AND LEVEL OF INTERNATIONAL RESERVES POINT NO PROBLEMS WILL BE FACED IN CURRENT DEFICIT FINANCE
State Minister Babacan said, ''but, the developments in capital inflow and level of international reserves point out that no problems will be faced in finance of current deficit.''
Babacan noted that confidence in economic policies was reflected to markets.
Interest rates of borrowing notes in both Turkey and abroad were decreasing, Babacan stated.
Babacan said that demand for financial savings and Turkish lira (TL) increased.
Steps taken in financial discipline had positive impact on finance program of the Treasury, Babacan pointed out.
Babacan said that the rate of domestic debt rolling around 96 percent in the first seven months of the year was expected to fall to 77 percent in the remaining part of the year.
It meant that Turkey would get 77 TL indebted in return for every 100 TL debt and the rest 23 TL would be used to widen finance possibilities of the real sector, Babacan pointed out.
Babacan stated that it was obvious that the Treasury could easily continue finance policies in the remaining part of the year.
That positive scene in economy and public balance was also supported by the fall in public debt stock, Babacan noted.
Babacan said that it was predicted that the net public debt ratio to national income would be below 70 percent by the end of 2003.
They targeted to decrease that ratio to 60 percent in the medium term, Babacan stated.
Babacan pointed out that the continuation of tendency of decrease in ratio of debt stock to national income was a precondition to improve economic stability.
The government would continue its determination to make structural reforms in the following days, Babacan emphasized.
Babacan said that legal arrangements would be given priority during the sixth review.
Adoption of public finance management and supervision law and preparation of second package on direct tax reform were among main structural reforms, Babacan stated.
Babacan said that a program on structural reforms was also prepared for the seventh review.
Putting into practice law on State Economic Enterprises (SEEs) was also among those structural reforms, Babacan said.
Babacan pointed out that structural reforms to be made in 2004 would mainly focus on privatization and financial sector.
The government was determined to implement the economic program without any deficiencies and concessions, Babacan stressed.
Stating that Turkish economy was in hands of trustworthy people, nobody should doubt about that.
BABACAN: ''WE HAVE TO IMPLEMENT VERY STRICT FINANCE POLICIES FOR A FEW MORE YEARS''
Replying questions of reporters, Babacan said that they had to implement strict finance policies until public debt stock was decreased to a reasonable level. He added that it was necessary to rapidly decrease debt stock for Turkish economy to grow in a stable way in medium and long term.
Upon a question regarding new debt repayment plan that was accepted by International Monetary Fund (IMF), Babacan said that according to the agreement signed with IMF, Turkey could repay its debts on time or one year ago and they conveyed their demand to IMF to repay a part of the debt early and the other part on time. He added that it was completely a normal implementation.
Emphasizing the importance of adjustment process to the European Union (EU), Babacan said, ''these economic problems are transient. What is important is Turkey's adjustment to EU standards in the aspect of political criteria. This is a sine qua non condition for healthy economic growth.''
Noting that they thought to receive a close date to start negotiations in the end of 2004 with adjustment and implementation of political criteria, Babacan said that the most important issue in those negotiations was economic criteria.
Emphasizing that there were important differences between EU and Turkey in the aspect of economic criteria, Babacan said that it was necessary to decrease those differences rapidly and to decrease public debt stock to a reasonable level and added that they envisioned to decrease this below 60 percent.
Upon a question regarding the loan worth of 8.5 billion U.S. dollars which was envisaged to be taken from the United states, Babacan said that there were not any problems in the usage of loan and the negotiations were continuing.
Upon another question whether the loan was related with sending soldiers to Iraq or not, Babacan said, ''there are some political conditions in Iraq. There are not any obstacles before the loan including the current political conditions.''

(GC-BRC) 02.08.2003