ANKARA - International Monetary Fund (IMF) Managing Director Horst Koehler said on Thursday that Turkey's economic program had delivered a remarkable strengthening of market confidence while interest rates had fallen sharply.
Koehler made a statement after IMF Executive Board released 502 billion U.S. dollars of loan for Turkey.
IMF Managing Director Koehler said that for the second year running, both economic growth and inflation look set to surpass program projections.
The Central Bank of Turkey had increased its international reserves while the Treasury's debt rollover had also improved, Koehler noted.
Koehler stated financial market reaction to the terrible bombings in Istanbul had been relatively limited-a sign of the economy's greater resilience to outside shocks.
Nevertheless, a significant reform agenda lied ahead, and there was no room for complacency, Koehler said.
Koehler pointed out that the government's commitment to meeting the 6.5 percent of Gross National Product (GNP) primary surplus targets for 2003 and 2004 had contributed importantly to recent positive developments.
The recent passage of a supplementary budget with strict controls over spending for the remainder of the year demonstrated the government's commitment to meeting the 2003 target, Koehler said.
Koehler stated that the government had also proposed the budget for 2004 consistent with meeting the primary surplus target.
Maintenance of fiscal discipline would remain of paramount importance in demonstrating full program ownership, and facilitating lower interest rates and debt sustainability, Koehler noted.
Koehler drew attention that the Central Bank of Turkey's conduct of monetary policy had been impressive, with inflation rates falling to their lowest levels in twenty-five years.
The growing credibility of the Central Bank, the government's continued commitment to fiscal discipline, and wage moderation in the public and private sectors, all should help in achieving next year's 12 percent inflation target, with the prospect of single digit inflation soon thereafter, Koehler said.
Koehler pointed out that the Turkish authorities had made considerable progress in direct tax and other fiscal structural reforms.
The decision to limit regional tax incentives to new employment and to curtail gradually the benefits in free trade zones would help in eliminating distortions in the tax system, Koehler said.
Koehler stated that passage of the Public Financial Management and Control Law is a landmark in fiscal reform that would help to strengthen the framework for budget preparation, execution, and control.
Recent amendments to the banking law should help boost the effectiveness of the Banking Regulation and Supervision Agency (BRSA), Koehler said.
Koehler went on saying, ''in the coming year, the authorities need to build on this by taking further steps to speed up banking reform, including by resolving Pamukbank and by restructuring and privatizing the state banks. While the new banking law amendments should allow the Savings Deposit and Insurance Fund (SDIF) to focus more clearly on asset recovery, it will be important that SDIF independence is preserved. Finally, the creation of an independent commission to identify the causes of the Imar bank scandal is welcome, and its findings need to be used quickly to enhance the quality of banking supervision.''
''Ongoing strong efforts to keep the program on track and vigorously pursue structural reforms in fiscal and banking should underpin a continued strengthening of market confidence and an improvement in economic performance going forward. These strong efforts deserve the continued support of the international community,'' Koehler added.
(BRC-AÖ) 19.12.2003