A 12-point economic package aiming to raise a total of about $10,000 million was announced on 19 September by Prime Minister Necmettin Erbakan and Deputy Prime Minister and Foreign Affairs Minister Tansu Ciller. The package supplements one announced in July aiming to raise the same amount (MEED 9:8:96).

Key components of the second package are the sale of unused real estate at present owned by state retirement and pension funds, and a 10 per cent withholding tax on income from government paper maturing or issued in 1997. The real estate sale aims to raise about TL 425 million million, and the withholding tax about TL 170 million million.

Erbakan said the government had already realised about $1,900 million of the first package, largely from a $1,200 million issue of bonds denominated in foreign exchange.

The remainder came from deposits lodged by expatriate workers with the central bank aiming to take advantage of a limited offer of duty-free car imports on condition of depositing DM 50,000 ($33,005).

The other measures in the new package include:

Advance taxes on tobacco products and alcoholic drinks TL 45 million million.

Introduction of a lower 4 per cent tax on stocks of precious metals, gems and jewellery, and a pardon for those holders previously not declaring these stocks, hitherto taxed as profits in balance sheets TL 64 million million.

Tax discounts on automobile purchases for resident Turkish citizens depositing DM 50,000 in a public sector bank. This aims to offset the impact on the domestic automobile industry of the duty-free cars offer in the first package.

Expanding the potential export capacity of a water project on the southern Mediterranean coast covering the Manavgat, Goksu and Kopru rivers. The project, on completion, is expected to yield at least $1,500 million-2,000 million annually. The government expects to award this project to a private sector concern for about $1,000 million TL 120 million million.

Fund levies on solvent imports, to curb their mixing with liquid fuels TL 20 million million.

In addition, the package includes sales to foreigners of share certificates in special tourist areas (TL 8 million million), modernising squatter housing (TL 20 million million), participation shares in future infrastructure projects (TL 10 million million); and doubling present levies on cellular phones to the $10 global average (TL 10 million million).

Critics say the package encourages regressive taxation by favouring the rich.

Business leaders like sakip Sabanci of the leading Sabanci group of companies also say the package does not obviate the need for a stability programme.

The IMF itself reportedly has strong reservations about the foreign exchange bonds in the first package. A senior IME official is quoted as saying that the package will do no more than shift part of the interest burden from the budget to the central bank, given interest rate differentials between the lira and foreign currency. By changing the bonds into lira through the central bank, the government may also fuel liquidity and by extension, high inflation.

Exchange rate: $1=TL 90,806.