Central Bank Will Continue Gradually Reducing Interest Rates Depending On Developments And Figures, Giorgianni

ANKARA - Lorenzo Giorgianni, International Monetary Fund (IMF) Mission Chief for Turkey said the Central Bank would continue the process of gradually reducing the interest rates -- which it started in September-- depending on developments and figures.
State Minister Mehmet Simsek and IMF Turkey Mission Chief Lorenzo Giorgianni held a joint press conference at the Treasury Undersecretariat building in Ankara on Friday after the completion of 7th review under the stand-by agreement.
Giorgianni said they reached an agreement with the government on the policies to be pursued.
Giorgianni noted that Turkey had so far successfully endured the global financial fluctuations, but pointed out that the economic liveliness had slowed down recently and rate of decline in inflation started decreasing.
Giorgianni said they agreed during talks with economy officials that the fiscal discipline and structural reforms would continue for economic growth and struggle with inflation.
Giorgianni underlined that the unexpected rise in food and energy prices and rise in taxes on oil and tobacco would exert an upward pressure on inflation rates which could slow down the declining trend in inflation.
Giorgianni said the Central Bank would take the necessary measures against factors that have permanent effects on inflation and growth and this stance would continue until progress had been made in the struggle with inflation.
Giorgianni said the second issue they discussed was public finance.
"Public finance will be tightened next year in a rate corresponding to one percent of Gross National Product(GNP). This tightening will enable low interest rates and contribute to the downward trend in inflation and decreasing the current account deficit."
"We support the 5.5 percent target of primary surplus," said Giorgianni who indicated they also supported the government's agenda to improve the financial structures of the State Economic Enterprises.
"We welcome the government's determined attitude in postponing its plans for reduction of fiscal responsibilities over employment --which we actually think would be helpful, but also would bring along a serious fiscal burden-- in line with the primary surplus target," said Giorgianni.
Giorgianni indicated that the government would introduce an extensive public finance package in the following months and said this package aimed at reducing the tax burden without jeopardising the downward trend in debt stock.
"The ultimate goal of these reforms is creating room for growth. The lowering of the rate of the net debt stock to the GNP, to 25 percent in the next five years is the goal of the mid term public finance policy," underscored Giorgianni.
Giorgianni said they also discussed the reforms to be implemented in energy sector during talks and said these would constitute the core of the reforms in the following years.
"The financial losses of companies operating in the energy sector, and failure in attracting investments is important problems of this sector. As a result, we foresee the risk of supply deficit and we believe this risk could threaten the dynamism in economy," said Giorgianni.
"Fixing electricity rates to an automatic principle will be only one of the steps that the economy authorities will take in this sector. Authorities will also take the measures enabling private companies to make investments in this sector."
Giorgianni said if Turkey realised these policies, not that it only would not be effected by problems encountered but would turn these into opportunities and successfully conclude the stand-by arrangement in May 2008.