The IMF has expressed doubts about the government’s plan to balance the budget in 1997, Ankara diplomats say. An IMF team left Ankara on 26 October after a week’s visit to assess the potential for renewed assistance. The IMF will probably urge the government to revise its ambitious 1997 targets before an agreement on new loans can be reached, diplomats add (MEED 1:11:96).
‘It would be an historic success to come up with a balanced budget,’ team leader Martin Hardy said after a meeting with Prime Minister Necmettin Erbakan before leaving the capital. He also stressed the IMF was looking for real progress in privatisation.
Economics State Minister Ufuk Soylemez at the same time said it was too early to talk about a possible standby agreement with the IMF. The last such facility and its attached economic programme lapsed amid political and economic uncertainty ahead of the general elections at the end of 1995.
In talks with government departments, the IMF team expressed deep reservations about a nominal 765 per cent hike in 1997 non-tax revenues. This would put them at TL 1,445 million million ($10,700 million) over 1996 estimates and will largely affect the budget balance, according to Ankara diplomats. The government has claimed it will achieve the increase by tapping around $10,000 million worth of fresh resources, such as income from privatisation of telecommunications giant Turk Telekomunikasyon.
The IMF team felt such provisional revenues should be placed below rather than above the line in the 1997 budget, which in effect would mean a large deficit rather than a zero balance, diplomats say.
An ambitious gross national product (GNP) deflator of 65 per cent targeted in the budget compared with expected inflation of an annualised 80-90 per cent at the end of 1996 also worried the IMF team, the diplomats say.
Other concerns expressed by the IMF team included a rapid reduction in domestic borrowing, which, given the treasury’s debt stock and servicing burden, seemed unlikely, officials say. Of less concern but also important was the current account deficit for 1996, expected to reach a record of about
$7,000 million, due largely to a soaring trade deficit.
The government’s main aim in inviting the IMF team seemed to be to achieve a show of IMF support rather than a new standby agreement immediately, according to the Ankara diplomats. This would boost Turkey’s creditworthiness in the international lending markets, they say.