Approval of a stand-by facility from the IMF was given on 8 July. The IMF praised the government’s recovery programme aimed at reducing inflation, boosting foreign exchange reserves, and improving the balance of payments.

The facility, to help the economy out of crisis, will be valued at SDR 509.3 million ($740 million), and will be disbursed in four tranches over 14 months. The first tranche of SDR 160.5 million ($225 million) was released on 11 July. The remainder will be disbursed in three equal tranches at regular periods, provided that IMF performance criteria are satisfied (MEED 1:7:94).

Officials say the government has obtained excellent terms from the IMF. By restoring confidence through its implicit seal of assurance, the stand- by should pave the way for direct sovereign borrowing again from the international markets.

The IMF officials is reportedly satisfied that the government is meeting its fiscal and budgetary performance targets set in an austerity programme introduced on 5 April. Monthly inflation has been reduced to 1.9 per cent in June in terms of wholesale prices and 0.9 per cent in the consumer index. Annualised inflation, however, was still high at 136 per cent and 115.8 per cent respectively. An average monthly inflation rate of 1.6 per cent in the third quarter is envisaged in the government’s programme.

The budget deficit had fallen to TL 42 million million ($1,350 million) at the end of June, according to Finance Minister Ismet Atilla. Without the austerity programme, it would have risen to TL 100 million million ($3,225 million), he said. The government’s programme seeks to halve the size of 1993’s deficit this year.

The current account deficit declined by 58.6 per cent in the first four months of the year to $778 million, compared with January-April 1993. This was mainly due to a 42 per cent drop in the trade deficit to $2,198 million. Although exports increased by 2.9 per cent to $5,159 million, imports fell 16.4 per cent to $7,357 million. The government has predicted that the current account in 1994 and 1995 will approximately balance.