TURKEY: Premier rules out fresh austerity

17 May 1996

Prime Minister Mesut Yilmaz ruled out introduction of a new stabilisation package and lira devaluation by his coalition government at a key Ankara press conference on 6 May. The economy required freemarket, structural reform, not austerity, he said.

However, political analysts said the plans outlined at the conference held out no new solutions in the struggle to solve the economy's problems.

Structural reform would help a transition from a rentier to a production-based economy, Yilmaz said. He noted that the bulk of the government's resources at present went to domestic and foreign debt payments.

The premier stressed privatisation as a means of structural reform, noting that about $250 million had been raised recently from the sale of cement plants. The government would soon withdraw entirely from the cement sector, he said.

Yilmaz also said a special consumption tax package aiming to compensate for the loss of customs duties within the EU customs union would be submitted to parliament in May. The new package would cover increased levies on petrol, motor vehicles, tobacco and alcoholic beverages, and other luxury goods, with the same rates applying for both imported and domestic products.

Another package would seek to bring Turkey's huge underground economy within the tax net, said Yilmaz. It would make comprehensive amendments in the commercial code, the banking act, and other economic legislation.

Economists noted Yilmaz's emphasis on structural reform came ahead of a visit by an IMF team later in May to appraise the need for renewed assistance. A previous IMF programme backing stabilisation from economic crisis in 1994, though generally successful, lapsed in autumn 1995 amid gathering political and related economic uncertainty ahead of December general elections.

The IME is expected to seek commitments by the government to economic restructuring this time around, notably privatisation and social security reform, according to Ankara diplomats. But critics say the weak, minority coalition government looks likely to be undermined further by divisions between its partners, Yilmaz's Motherland Party (ANAP), and the True Path Party (DYP) led by former premier Tansu Ciller, reflecting the two leaders' deep personal rivalry and differences (MEED 10:5:96, page 31).

Notably absent from the press conference were the former premier and DYP ministers, the latter claiming they had not been told about it. Yilmaz's statements were also criticised as unrealistic by former premier Bulent Ecevit, leader of the Democratic Left Party (DSP). The minority coalition's survival depends on the DSP's support.

The next test will have been a parliamentary vote on 9 May on whether to investigate Ciller's involvement in alleged irregularities in the 1994 privatisation of state shares in car-maker Tofas. Ciller already faces a probe into suspect electricity awards, because ANAP failed to support her in a parliamentary vote on 24 April.

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