TURKEY: New economic programme to tap banks' overseas reserves

09 August 1996

Prime Minister Necmettin Erbakan announced a 10-point economic package on 31 July to raise new resources including tapping the overseas reserves of Turkish banks. The package drafted by the new Islamist-led coalition aims to close a wide budget deficit and offset increased spending like a 50 per cent civil servants' salary hike.

The 10 points announced by Erbakan included:

The sale of foreign exchange and foreign exchange-indexed bonds to Turkish banks to tap an estimated $9,500 million held abroad.

The premier admitted around $3,500 million bound up in letters of credit could not be accessed, however.

Internally, the mandatory sale of foreign exchange and foreign exchange-indexed bills to domestic banks to tap their foreign exchange reserves. Central Bank regulations would have to be amended to make the sales mandatory, however, Erbakan said.

In addition to the sales of treasury paper, the coalition expected to raise a further 575 million million (around $7,000 million) from the other measures in the package, said Erbakan. These include:

raising lower limits on foreign exchange deposits held by expatriate workers in a central bank programme, but shortening their maturities the sale of state land and housing, also announced by Deputy Prime and Foreign Affairs Minister Tansu Ciller on 22 July, when she also announced a 6 per cent fund levy on short-term foreign financing for exports the pooling of all balances held by state economic enterprises in a central treasury account devolution of tax collection and inspection to municipalities, which will be permitted to deduct their own allocations incentives for increased social security premium payments the collection of fees from around 18,000 holders of mining licences at present in default out of a total 21,000 licences issued.

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