TURKEY: World Bank delays loan

08 April 1994

The World Bank has delayed approval of a $100 million loan to support privatisation because of slow progress with public-sector reform and failure to tackle the budget deficit, senior treasury officials say.

The bank is understood to be awaiting details of a promised austerity package to have been announced after the 27 March local elections.

A decision had been expected by the World Bank's board on 24 March. However, the executive committee did not submit the technical assistance loan to the board meeting as scheduled because of fears that it would be rejected, according to the Turkish sources.

The prompt announcement by the government of a medium-term financial policy aimed at cutting the budget deficit would bring a positive response from the bank, the sources say. A package acceptable to the bank and the IMF could also open the way to structural adjustment funding.

Recently the World Bank has concentrated on project and technical assistance facilities, due to lack of progress with macro-economic reforms. Total World Bank lending has also fallen because the bank now rates the economy as mature. Its annual loan commitments have dropped to about $350 million from $1,000 million-plus at the end of the 1980s.

However, the government desperately needs the revenues from the sales of state assets. Around $2,700 million is expected from denationalisation in 1994 by the Public Participation Administration (KOI), the state body in charge of privatisation. The KOI says this will rise to $18,000 million in 1995.

The treasury may also come to the international markets later in April with a $2,000 million, convertible bond issue linked to the eventual privatisation of the telecommunications division of the posts, telegraphs and telecommunications (PTT) administration.

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