ANKARA - International Monetary Fund (IMF) Turkey Desk Chief Reza Moghadam said on Wednesday that the program implemented by the government yielded favorable results and stated that results were reached over expectations and targets in economy.
State Minister Ali Babacan and Moghadam held a joint press conference.
Stating that meetings with economy administration were completed, Moghadam said that a consensus was reached on steps which should be taken.
Moghadam said that this consensus would first be presented to approval of IMF administration and then it would be presented to approval of IMF Executive Board.
Moghadam said that it was seen that inflation rate could stay lower than the target which was determined as of the end of year thanks to sound policies with high credibility of the Central Bank and noted that there was a great decrease in interest rates according to the last review.
Stating that reserves continued to increase, he said that it was a development which would decrease external fragility of Turkey.
Moghadam said that the program which was implemented by the government with the support of IMF yielded favorable results and stated that results were reached over expectations and targets in economy.
He noted that if the program was to be carried on with determination, more positive results would be reached.
Stressing that consensus was reached on macroeconomic targets and the framework during meetings, Moghadam said that consensus was also reached on basic parameters on public finance.
Moghadam said that they especially focused on three important policies during this period and stated that one of them was to reach 6.5 percent primary surplus which was foreseen within the scope of the 2003 year budget. He stated that IMF delegation and officials reached consensus on measures concerning reaching this target.
Moghadam said that consensus was also reached on policies and measures on reaching 6.5 percent primary surplus in 2004 and stated that a budget based on this issue would be submitted to the parliament this week.
Stating that several constructive reform issues were also on the agenda, he said that one of them was Public Financial Management Law, the other was strengthening effectiveness of the Banking Regulation and Supervision Agency (BRSA), the third one was tax reform package and the fourth one was to rationalize redundant employment.
Moghadam said that all factors included in the program were preserved and stated that consensus was reached on factors which would help complete the sixth review with steps that should be taken.
Moghadam added that there were a few issues that they expected to be completed in the coming days.
AN ACCELERATING PRIVATIZATION CAN DRAW MORE DIRECT FOREIGN CAPITAL

Moghadam said that an accelerating privatization could draw more direct foreign capital and also macro economic stability was an important element in drawing foreign capital.
When asked the what would be the effects of deviation in privatization, Moghadam said that there could be problems in privatization in last months, stating that this was not because of failure in exerting efforts on the ıssue, but because of some other reasons and developments.
Moghadam said that some big privatizations would be made in coming months and added that they thought those months would be important for privatization.
Upon another question, Moghadam said that he had some concerns about tax incentives which would be fulfilled in regions having low income, but they reached agreement with Turkish officials on management of those incentives.
Noting that main aim in regional tax incentives was to increase employment, Moghadam said that they could not pass beyond this aim.
BABACAN: WE REACHED CONSENSUS WITH IMF ON MEASURES TAKEN REGARDING 2004 YEAR BUDGET
Babacan said that they reached consensus on measures with IMF and ministries would make necessary statements on the issue.
Noting that the letter of intent was about to be completed, Babacan said that they already started to write the letter. He added that they would complete the letter of intent after some steps were taken.
Babacan said that industrialists, businessmen and foreign investors who would make investments in provinces whose national income was lower than 1.500 U.S. dollars would have many important incentives.
Stating that organizations in free zones would be exempted from tax of institutions till their license period ended, he said that companies which were manufacturing goods and provided people with jobs would continue to be exempted from this tax till Turkey became a member of the European Union.
Babacan said that Finance Ministry would have a full supervision on free zones.
Concerning the 8.5 billion U.S. dollars of loan granted by the United States to Turkey, Babacan said that technical studies on the loan continued.
Asked which legal arrangements should be made before the meeting of IMF Executive Board, he said that submission of 2004 Year Budget Law to the parliament would be adequate for it.
Babacan said that there was need for some legal arrangements on speeding up cases which were opened concerning the decisions of the Banking Regulation and Supervision Agency (BRSA) and approval of Public Management and Control Law in the Parliamentary General Assembly and stated that a part of those was opened to signature in the Council of Ministers. He added that those legal arrangements should be approved in the Parliamentary General Assembly.
Stating that some new arrangements were made on rationalization of employment in State Economic Enterprises, Babacan said that those arrangements should be put into practice.
Babacan said that they put into practice an additional measure till about 3 per thousand of GNP in order to take under guaranty of reaching 6.5 primary surplus target in the budget.
BABACAN: ALLOCATION OF FUNDS FROM SPECIAL CONSUMPTION AND SPECIAL TRANSACTION TAXES AND INCOME TAX AND CORPORATION TAX WILL CONTINUE
State Minister Babacan said that the public finance management audit law would be put into practice as of 2005 and thus, Turkey would welcome three-year budget law for the first time in its history.
Babacan pointed out that they had reached the final stage in public finance management and audit tax reform and Banking Regulation and Supervision Board (BRSA) law in the sixth review meetings.
The public finance management and audit tax law would be submitted to parliament in a few days, Babacan said.
Babacan noted that after that law was adopted by parliament, pre-conditions for the sixth review with the IMF would have been fulfilled.
Pointing out that Turkey had been aware of its potential, Babacan said that a return back could never be possible.
Babacan added that the government would continue to be determined to take news steps beneficial to Turkey and Turkish people.
BABACAN: WE TALK ISSUE OF SENDING SOLDIERS TO IRAQ NEITHER WITH IMF NOR WITH ANOTHER INSTITUTION
When a reporter asked whether they determined the cost of sending soldiers to Iraq and discussed it with IMF, Babacan said that they did not discuss this issue with IMF or another institution and added that security of Iraq was important. He said that financial dimension of such a significant development was not discussed.
Babacan said that the beginning of Iraq war had negative effects on economy and added that the war had effects on current accounts deficit.
Upon a question on fulfilling commitments given to IMF, Babacan said that presentation of 2004 budget to Parliament would be enough and added that if commitments were not completed until IMF meeting, they would search for another way.
(GC-AY) 15.10.2003