Hurriyet English with wires
Oluşturulma Tarihi: Haziran 24, 2008 14:03
Turkey is continuing its studies for a new precautionary stand-by agreement with the International Monetary Fund (IMF), Turkish Economy Minister Mehmet Simsek told CNNTurk on Tuesday.
In regard to Turkey's relations with the IMF, Simsek said that the Turkish public sector did not need any financial support from the fund. "However, an agreement to be signed with the IMF would decrease the risk premium, and within this framework, we are conducting studies on a cautious stand-by deal," he added.
This is the first time Turkish officials have stated they are working on a precautionary stand-by deal, while Prime Minister Tayyip Erdogan last week said that Ankara would shortly decide what form its future relationship with the fund would take.
Turkey's $10 billion IMF loan deal expired in May and an IMF team currently in Turkey continues to carry out a technical review of this program. Turkey can choose either a precautionary stand-by deal with access to funding or less stringent post-program monitoring with no access to IMF loans. Investors favor another stand-by agreement as it would ensure Turkey sticks to strict fiscal discipline.
A precautionary stand-by deal is welcomed by investors amid the political uncertainties surrounding the closure case filed against Turkey's ruling Justice and Development Party (AKP).
Turkey's top prosecutor Abdurrahman Yalcinkaya filed a case against the Islamist-rooted AKP in March, and demanded the party's closure, as well as a ban on 71 officials from political activities.
Since these uncertainties pose a risk to investors the amount of foreign investment crucial for Turkey tends to decrease. Turkey is seen as vulnerable to shifts in global liquidity because of a large current account deficit, largely funded by foreign investment.
Turkey attracted a total of $21.9 billion of foreign direct investments (FDI) in 2007. Turkey adjusted an earlier estimate of $25 billion in FDI in 2008 and expects to attract $13 billion by end-year.
Economists expect Turkey’s current account deficit to reach a record $50 billion by the end of 2008.
Simsek also commented on the energy shortage and said works were being carried out in an effort to promote the use of hydroelectric power plants, wind energy and thermal power plants in Turkey more effectively. Tenders on nuclear power plants will be held in September and the following months, Simsek said.
