ANKARA (A.A) - 11.08.2002 - Kemal Dervis who resigned from his post as the state minister in charge of Treasury, worked to restructure Turkish economy since the time he was invited to Turkey by Prime Minister Bulent Ecevit.
Dervis was working as the World Bank Deputy Governor in Washington when Ecevit invited him to Turkey after Feb. 19, 2001 economic crisis. He came to Ankara on March 1, 2001 and on March 3, 2001 he was appointed as the State Minister in charge of Treasury.
A little while before Dervis came to Turkey, Turkey lost 7.6 billion USD in one day when a crisis erupted when Prime Minister Bulent Ecevit and President Ahmet Necdet Sezer had a row during a National Security Council meeting on Feb. 19, 2001.
Repo interests increased 760 percent while the stock market dropped by 14.6 points. It was announced that 7.3 billion USD of this foreign currency returned to the Central Bank and repo interests reached 3000 percent.
Repo interests increased to 7500 percent on Feb. 21, 2001, stock market dropped 18.1 percent, and the 3-day loss was 29.3 percent. There were allegations that hte banks bought 3 billion USD from the Central Bank. Turkey adopted floating exchange rate. One USD increased from 689,000 TL to 964,000 TL, interest rates reached 5200 percent. On Feb.23, 2001, monthly credit card interest rates increased to 60 percent. Standard and Poor's dropped Turkey's credit note.
In such an economic environment, Dervis's coming to Turkey caused big reactions. Opposition parties claimed that Turkish economy would not recover with his coming to Turkey after two big economic crises while Dervis stated that he would recover the economy by implementing a serious economic programme.
Dervis has attracted great attention of the press and the Turkish people with his tennis matches, his American wife Cathrine Dervis and his son Erol Dervis who is a DJ.
Dervis first announced the Urgent Economic Measures package on March 14, 2001. He said that the losses of the Turkish banking sector and structural flaws were the most important problems of the economy and he announced a number of measures to recover the banking sector. He decided to follow an active and stable money policy under the targets laid out by the Central Bank.
On April 14, 2001, Dervis announced the Transition Programme to Powerful Economy with Treasury Undersecretary Faik Oztrak and Central Bank Governor Sureyya Serdengecti.
The programme included the situations of state and fund banks, macro economic expectations, inflation targets, growth rate, expenditure measures, foreign financing, privatization, agriculture and long term perspectives.
The increase in internal debt stock of public sector in November 2000 necessitated ensuring foreign source to roll over the debt. A total of 16.5 billion dollars of credit was provided from IMF and World Bank for the new economic programme.
The economic programme led the country to undertake important regulations as structural reforms, and the Banking Sector Reconstruction and Rehabilitation Programme was prepared.
Many banks were transferred to Savings Deposit Insurance Fund during Dervis's term in office. These banks were united, the ones which could be sold, were sold and those which could not, were closed. A source of 20 billion dollars was transferred to banks in the fund and 23 billion dollars was transferred to public banks. A significant part of public sector's short term debt was converted to foreign exchange.
In social security reform, legal regulations were done to improve the administration of Social Security Agency (SSK) and Social Security Agency for Artisans and Self-Employed (Bag-Kur) and to strengethen the capacity of Labour Ministry to monitor the administration of SSK and Bag-Kur.
Important steps were also taken in the field of financial administration and transparency, and direct income support policy was adopted within the scope of agricultural reform programme.
Electricity Market Law was adopted by the parliament in the beginning of 2001 and a new Sugar Law went into force in April, 2001 which also foresaw privatization in sugar sector.
The state internal borrowing interests which reached 191 percent following the crisis in February 2001, decreased to 70 percent in May 2001 due to the studies undertaken in economy sector.
The Sept. 11 attacks in the U.S. in 2001 affected the whole world and Turkey which again had certain problems got an additional credit of 10 billion dollars from IMF and World Bank. The IMF support provided to Turkey after 1999 reached 30 billion dollars.
Despite that, the Turkish economy in 2001 shrank by 9.4 percent in 2001. The wholesale prices index which decreased to 32.7 percent at the end of 2000, increased to 88.6 percent at the end of 2001 and the consumer prices index which decreased to 39 percent at the end of 2000 increased to 68.5 percent at the end of 2001. As of July, 2002, whole sale prices index decreased to 45.9 percent and the consumer prices index decreased to 41.3 percent.
Foreign exchange rate increased significantly by the adoption of floating exchange regime on Feb. 21 2001. One U.S. dollar which was 689,000 TL before February 21, 2001, increased to 964,000 TL with the floating exchange and it became 1,000,000 TL on March 14, 2001; 1,100,000 TL on March 29; 1,200,000 TL on April 4; 1,300,000 on July 25, 2001. It increased to 1,660,000 TL on October 19, 2001, closed the year with 1,470,000 TL. One U.S. dollar which decreased to 1,298,000 on April 11, 2002, increased to 1,710,000 TL on July 11. One U.S. dollar is recently 1,658,000 TL.
Kemal Dervis also went abroad frequently to explain the economic programme.