The Board’s decision, made in conjunction with the completion of the sixth and seventh reviews of its economic program, will enable Turkey to draw up to SDR 3 billion ($3.8 billion) immediately. Further drawings of SDR 1.2 billion (about $1.5 billion) each will be made available not earlier than June 25 and July 25, and of SDR 2.4 billion (about $3 billion) each not earlier than September 20 and November 15 following the completion of further reviews of the program.
Following the Board discussion, IMF First Deputy Managing Director Stanley Fischer said:
“The IMF welcomes the strengthened program prepared by the new economic team in Turkey. Full implementation of this program should restore macroeconomic stability and address the structural root causes of the country’s problems, thereby laying the foundations for the resumption of growth.
“The Turkish program aims at strengthening confidence, addressing the costs arising from the crisis by increasing the primary fiscal surplus, speeding up the reform of the banking sector, and undertaking wide-ranging structural reforms. Decisive implementation of the program’s policies, together with the availability of significant additional external support, should initiate a virtuous cycle characterized by lower interest rates, stronger public finances, and a recovery of economic activity.
“The IMF commends the depth and breadth of the new economic program. The emphasis on banking reform is appropriate, especially given the structural weaknesses in this area that were seen during the recent crises. The elimination of public sector banks’ large overnight exposure, their full recapitalization, and the overhaul of their governance structure will go a long way to strengthen the financial sector. In addition, measures to privatize key companies and reform major domestic markets, including the telecommunications, electricity, natural gas, tobacco, and sugar markets, and to enhance governance and improve transparency, are essential elements of the program.
“The program’s macroeconomic policies are strong, in particular the major fiscal effort that the Turkish authorities are undertaking to reestablish fiscal solvency. On monetary policy, the adoption of the new central bank law will give the central bank operational independence in the pursuit of price stability. In the short term and before a full-fledged inflation targeting framework is put in place, monetary policy will focus on the control of monetary aggregates in the context of a floating exchange rate framework.
“The IMF is demonstrating its backing for this ambitious program by providing exceptional financing in its support. Its success will take both determined implementation by the authorities and sustained support by the private sector,” Fischer said.