Turkey and the IMF: the beginning of a new era

According to analysts, Turkey and the fund are not expected to bring talks beyond the exchange of ideas on the course of markets, at least for some time. The decision is also important for having broken the deadlock in talks.

An IMF statement notes that the parties “will assess in detail the latest developments affecting the Turkish economy, and exchange views with the Turkish authorities on the outlook and on their policy plans” as part of a 2010 Article IV consultation program, a routine carried out with all fund members on an annual cycle.

The Treasury Undersecretariat’s statement acknowledges the beginning of the new era in relations as it refers to nothing more than an “exchange of ideas on finance and monetary policies along with public debt developments.”

Having long been deemed a rescuer during the Turkish economy’s worst times -- with 19 stand-by deals, only the final two of which were successfully completed -- the IMF will likely function as nothing more than as a “consultation mechanism,” latest developments show.

A senior Treasury official, who asked that his name remain anonymous, cited an “inflexible” IMF policy as the major factor that led the issue to the impasse. The official told Today’s Zaman that Rachel van Elkan, the mission chief for Turkey at the IMF, failed to be productive during talks with government officials. Turkey and an IMF team headed by van Elkan had been holding official talks over a new loan deal since Jan. 8 of last year. During the past 13 months the IMF was criticized for causing the economy administration trouble with some “last minute proposals.” The government was particularly irked by an IMF proposal for some harsh austerity measures in spending.

One thing that comes as a big surprise, particularly for some business circles that have long been pressuring the government to seal a deal with the fund, is that markets as yet remain indifferent to this historic transformation in Turkey-IMF relations. Analysts agree this is proof that a stand-by deal is not actually a “matter of life and death” for the Turkish economy as claimed by some.

Having closed the Wednesday session with a slight 0.39 percent loss at 52,753 points, the İstanbul Stock Exchange (İMKB) opened on Thursday with a 0.1 percent gain in shares. The US dollar was trading at TL 1.53, down from TL 1.54 on Wednesday.

Asaf Savaş Akat of the Vatan daily argued in his column on Thursday that the market’s reaction to the stand-by deal decision once again showed that the long-lasting pressure on the government was “unjust.” “Heated discussions on an IMF deal cooked up by some business circles were nothing but a waste of time. The claims were unrealistic, and we all saw the results; an IMF stand-by deal is of zero importance to Turkey,” he said.

In other comments related to the issue, Turkish Businessmen and Industrialists’ Association (TÜSİAD) Chairwoman Ümit Boyner said on Wednesday that discussions on a stand-by deal have been in vain. “We should now concentrate on attracting the necessary cash inflow that will help accelerate the economy’s growth,” she said, adding that maintaining fiscal discipline has become more important than before. TÜSİAD has long led the attempts to convince the government to forge a deal with the IMF.

Sabancı Holding Retail Group President Haluk Dinçer said on Wednesday they did not expect a serious negative impact on the Turkish economy following the suspension of talks on a stand-by deal with the IMF. “The government has managed the process well, and the anticipated deal remained a virtual anchor of confidence for the markets,” he said. Recalling that Turkey’s credit rating was recently upgraded, Dinçer indicated that they have faith the government will maintain fiscal discipline in the months to come.