The Turkish government plans to freeze prices of goods produced in the state sector from January to June next year as part of its struggle to combat high inflation, Prime Minister Mesut Yilmaz said on 1 December. However, Yilmaz said the price freeze is not linked to the government's current bid for support for its policies from the IMF.

His statement followed the announcement a day previously of a January-June price freeze for refined petroleum products by economy State Minister Gunes Taner.

Turkey's inflation is driven by psychological expectations, Finance & Customs Minister Zekeriya Temizel said on 1 December, adding that the public sector accounted for 24 per cent of product groups in the wholesale price index. The annual rate of inflation was 87.5 per cent at the end of October.

The government has also called on private sector companies to halve their projected price increases in 1998. Economists note the combined strategy seems much the same as one implemented by Mexico in 1987. The Mexican government went on to reach anti-inflation agreements with employers and unions, and subsequently psychological expectations played a large part in bringing down prices, the economists say.

However, both trade unions and employers doubt the feasibility of the price freeze in the Turkish context. Yilmaz himself admitted as much in his 1 December statement.

Yilmaz emphasised that the price freeze had not been dictated by the IMF. Another high-level mission led by Taner was scheduled to resume talks with the IMF on 10 December in Washington. The IMF reportedly wants one year of austerity, aiming at an inflation rate of 20 per cent by the end of 1998. The government's more gradual, three-year programme targets 3 per cent inflation by the end of 2000.