Local spending a headache for IMF
Güncelleme Tarihi:
by Erdal Sağlam - Referans
Oluşturulma Tarihi: Mayıs 09, 2009 00:00
ANKARA - The International Monetary Fund is pressing the Turkish government to cut municipality spending, according to foreign bankers who spoke on condition of anonymity. When the IMFplaced a similar request on the table in January, Prime Minister Recep Tayyip Erdoğan said cutting local spending was ’unacceptable.’ If the issue is resolved, an accord may be imminent
Curtailing municipality expenses is reported to have come onto the agenda again during the ongoing talks with the International Monetary Fund, it has been revealed.
The issue was originally on the agenda during the IMF team’s visit to Ankara earlier this year in January; however, Prime Minister Recep Tayyip Erdoğan then described IMF requests for lower local government spending as "unacceptable."
A team of IMF experts may visit Ankara in the coming few weeks, according to some informed investors who spoke with business daily Referans on condition of anonymity. IMF officials reportedly said that the talks are ongoing via mutual correspondence and expected to resolve the issue of financial measures as well as the revenue administration and municipality expenditures.
The institutions that act as intermediaries for foreigners investing in Turkey are involved in intense talks with economic bureaucrats as well as IMF officials to see what the long-awaited IMF deal will be like. "Significant steps have been taken and no important problem seems to have emerged," one foreign banker told Referans, regarding the ongoing talks.
The IMF is reportedly focusing on municipal spending once again following the March 29 local elections, foreign bankers said, adding that there were big differences between IMF forecasts and government expectations on macro-balances. However, IMF officials do not deem them as important differences, they said.
The talks will focus on financial measures to be taken, according to the bankers. The IMF is persistent on the restructuring of the revenue administration and curtailing municipal spending, they added.
A few more weeks
Following the expected visit of an IMF team to Ankara, it will not take long for a regular standby deal to be concluded. If the current talks reach a conclusion, it will in a sense mean the deal is sealed. The IMF expects to reach that point in a few weeks’ time.
Turkish officials agree with the IMF that municipal spending has risen to a level that threatens budgetary balances. Therefore, the Pre-accession Economic Program text, where the government has revised its economic targets, has stated that the delayed law concerning municipal revenues will be issued this year.
Budget transfers to municipalities will be revised, and local administrations will be pressured to pay their overdue debts to the central government.
The exceptions concerning the borrowing limits of local administrations will also be revised and narrowed.
Following the expiration of the former IMF program last June, the government increased the budget to municipalities with a law dated July 2008. Due to the increase, an additional burden of approximately 800 million Turkish liras was reported to have emerged.
The figure was expected to reach 3.9 billion liras this year; however, the burden is not expected to be so high now, as is it is connected to tax revenues.
The issue was originally on the agenda during the IMF team’s visit to Ankara earlier this year in January; however, Prime Minister Recep Tayyip Erdoğan then described IMF requests for lower local government spending as "unacceptable."
A team of IMF experts may visit Ankara in the coming few weeks, according to some informed investors who spoke with business daily Referans on condition of anonymity. IMF officials reportedly said that the talks are ongoing via mutual correspondence and expected to resolve the issue of financial measures as well as the revenue administration and municipality expenditures.
The institutions that act as intermediaries for foreigners investing in Turkey are involved in intense talks with economic bureaucrats as well as IMF officials to see what the long-awaited IMF deal will be like. "Significant steps have been taken and no important problem seems to have emerged," one foreign banker told Referans, regarding the ongoing talks.
The IMF is reportedly focusing on municipal spending once again following the March 29 local elections, foreign bankers said, adding that there were big differences between IMF forecasts and government expectations on macro-balances. However, IMF officials do not deem them as important differences, they said.
The talks will focus on financial measures to be taken, according to the bankers. The IMF is persistent on the restructuring of the revenue administration and curtailing municipal spending, they added.
A few more weeks
Following the expected visit of an IMF team to Ankara, it will not take long for a regular standby deal to be concluded. If the current talks reach a conclusion, it will in a sense mean the deal is sealed. The IMF expects to reach that point in a few weeks’ time.
Turkish officials agree with the IMF that municipal spending has risen to a level that threatens budgetary balances. Therefore, the Pre-accession Economic Program text, where the government has revised its economic targets, has stated that the delayed law concerning municipal revenues will be issued this year.
Budget transfers to municipalities will be revised, and local administrations will be pressured to pay their overdue debts to the central government.
The exceptions concerning the borrowing limits of local administrations will also be revised and narrowed.
Following the expiration of the former IMF program last June, the government increased the budget to municipalities with a law dated July 2008. Due to the increase, an additional burden of approximately 800 million Turkish liras was reported to have emerged.
The figure was expected to reach 3.9 billion liras this year; however, the burden is not expected to be so high now, as is it is connected to tax revenues.