BY OKAN MUDERRISOGLU
SABAH- October 6-7, when the annual meeting of the International Monetary Fund and the World Bank will be held in Istanbul, are important dates for Turkey in two respects. Firstly, strategies for overcoming the global economic crisis will become clear in Istanbul. Secondly, the consensus on a possible new economic program with the IMF will become clear. Hard work on this program is underway in Ankara behind closed doors. On the one hand, there is the IMF alternative, and on the other, there is the Middle-Term Program which can be implemented without the IMF.
Ankara's economic administration sees the future of our relations with the IMF from a different perspective than in the past, as they feel there's no urgent need for IMF financial leverage. The government isn't even shying away from the idea that an economic program without the IMF could have high credibility, but the difficulty of convincing the markets about the program's sustainability in the runup to the next general elections (in 2011 at the latest) can still be felt. The final issue concerns growth. Some argue that the growth atmosphere following this year's economic shrinkage of 6% will allow a third term for the government.
Another extra-economic factor can be added to this, namely, the US' role and influence over the IMF on solving the Kurdish issue. In other words, efforts for a democratic opening, which are gaining momentum, overlap with US plans and strategic goals to withdraw its military forces from Iraq in 2011. Once this sensitive link is combined with the US' willingness to see a stable Turkish economy, the IMF contribution becomes a natural consequence.
Negotiations between the IMF and Turkey hit a snag over fiscal harmonization. The IMF wants the following three indicators to be corrected by 2012:
1. There should be improvement in the debt/Gross Domestic Product (GDP) ratio. The debt stock should again be falling.
2. The economy should be able to produce a primary surplus.
3. Measures to cut the budget deficit should be initiated this year.
Besides these points, the calculations in Ankara reflect the following atmosphere:
1. The debt/GDP ratio will stop rising at the end of 2012, not to fall rapidly but to hold steady for some more time.
2. The budget wouldn't produce a primary surplus at the end of 2012, but it will reach a balance.
3. When the economy starts growing again next year, tax revenues will improve and thus the budget deficit will fall automatically. The picture from recent data is as follows:
1. The IMF might approach the three-year program more favorably.
2. The government might accept a flexible program supported by the IMF, rather than a strict standby.
3. The IMF will focus on structural reforms, most of which consist of deferred promises - for example, activating a risk-oriented control model, conducting joint tax and insurance premium collection, working to prevent waste in healthcare spending, etc.