Merrill urges Turkey to come to terms with IMF
Güncelleme Tarihi:
Daily News with wires
Oluşturulma Tarihi: Mayıs 28, 2009 00:00
BRUSSELS / ANKARA - Turkey is in urgent need of outside financing and thus has to sign a new standby with the International Monetary Fund, according to Merrill Lynch. In a report, Merrill analysts say a falling foreign capital inflow would be added on top of a widening funding gap. Meanwhile, a Moody’s executive says Turkey has room to wait until the end of summer
Turkey must change its attitude and sign a new standby deal with the International Monetary Fund, or IMF, because of its urgent need for outside financing, said Merrill Lynch, a global financial services firm owned by Bank of America, Wednesday.
The government has been dragging its feet since the last standby expired in May 2008. The government is "trying to write history by helping Turkey to pull out of the IMF yoke," the Anatolia news agency cited Merrill Lynch's weekly analysis of developing markets. But the timing is not quite right due to the global crisis, Merrill added. The analysis also said Turkey was right in postponing IMF talks due to imposed restrictions by the Fund and the local elections last March.
Turkey should sign a loan deal with the IMF, otherwise growth would slow down significantly as the declining foreign capital inflow would be added on top of a widening funding deficit, Merrill said. That would cause the Turkish Lira to lose significant value and generate higher real interest rates. The private sector would also be negatively affected by such developments, according to Merrill. By keeping investors waiting longer, their risk perception could be heightened and the possibility of them pulling out of the market could be reinforced, said the bank.
Moody's Investors Service also delivered a message on the issue Wednesday. A representative of the agency told Reuters that Turkey would need IMF financing later this year due to pressure on its external deficits, but has room do without a deal in the summer months.
"Our balance of payments analysis suggests that the government has room to do without an IMF financing program for a limited time, i.e. during the summer months," Moody's Senior Vice President Kristin Lindow told Reuters.
Lindow reiterated her comments published earlier this week in the Turkish media that the country's "Ba3" credit rating probably will not change whether or not there is an IMF accord.
"Moody's has indicated that its rating will likely be unaffected whether or not Turkey concludes an agreement ... Turkish policy makers might thus be still asking themselves 'where's the beef' in terms of closing an IMF deal early, if they don't benefit from a rating upgrade," said Timothy Ash of Royal Bank of Scotland.
Moody's forecasts that the economy will shrink 4 percent, while the IMF sees a 5.1 percent contraction. "The relative lack of external financing ... in the absence of an IMF program ... is likely to constrain growth due to large investment needs and relatively low savings," Lindow said.
The government has been dragging its feet since the last standby expired in May 2008. The government is "trying to write history by helping Turkey to pull out of the IMF yoke," the Anatolia news agency cited Merrill Lynch's weekly analysis of developing markets. But the timing is not quite right due to the global crisis, Merrill added. The analysis also said Turkey was right in postponing IMF talks due to imposed restrictions by the Fund and the local elections last March.
Turkey should sign a loan deal with the IMF, otherwise growth would slow down significantly as the declining foreign capital inflow would be added on top of a widening funding deficit, Merrill said. That would cause the Turkish Lira to lose significant value and generate higher real interest rates. The private sector would also be negatively affected by such developments, according to Merrill. By keeping investors waiting longer, their risk perception could be heightened and the possibility of them pulling out of the market could be reinforced, said the bank.
Moody's Investors Service also delivered a message on the issue Wednesday. A representative of the agency told Reuters that Turkey would need IMF financing later this year due to pressure on its external deficits, but has room do without a deal in the summer months.
"Our balance of payments analysis suggests that the government has room to do without an IMF financing program for a limited time, i.e. during the summer months," Moody's Senior Vice President Kristin Lindow told Reuters.
Lindow reiterated her comments published earlier this week in the Turkish media that the country's "Ba3" credit rating probably will not change whether or not there is an IMF accord.
"Moody's has indicated that its rating will likely be unaffected whether or not Turkey concludes an agreement ... Turkish policy makers might thus be still asking themselves 'where's the beef' in terms of closing an IMF deal early, if they don't benefit from a rating upgrade," said Timothy Ash of Royal Bank of Scotland.
Moody's forecasts that the economy will shrink 4 percent, while the IMF sees a 5.1 percent contraction. "The relative lack of external financing ... in the absence of an IMF program ... is likely to constrain growth due to large investment needs and relatively low savings," Lindow said.