Journal Issue

Program on track: IMF completes second review under Stand-By credit for Turkey, releases $295 million

International Monetary Fund. External Relations Dept.
Published Date:
January 2000
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The IMF Executive Board announced in a news brief issued on July 6 that it has completed the second review under the Stand-By credit for Turkey. The full text of News Brief 00/52 is available on the IMF’s website (

The review was completed in light of the observance of end-March performance criteria, among other things, and the judgment of the IMF that the program remains on track. As a result of the review, Turkey will be able to draw up to the equivalent of SDR 221.7 million (about $295 million) from the IMF (see page 236).

The three-year Stand-By Arrangement was approved on December 22, 1999, in a total amount equivalent to SDR 2.9 billion (about $3.9 billion). Turkey has so far drawn the equivalent of SDR 443.4 million (about $590 million) under the Stand-By Arrangement. Commenting on the Board discussion, IMF First Deputy Managing Director Stanley Fischer said, "The Executive Board of the IMF commended the Turkish authorities on their steadfast implementation of the disinflation and fiscal adjustment program launched in late 1999, which led to a rapid deceleration of inflation and a resumption of economic growth.

"Strong fiscal performance in the first half of 2000 has underpinned the improvement in macroeconomic conditions. Despite stronger-than-expected revenues and a faster-than-anticipated drop in interest rates, expenditure policies were not relaxed. The authorities’ commitment to keep nominal primary expenditures in line with the program for the rest of 2000 will likely result in a primary fiscal surplus higher than that envisaged by the original program target for 2000.

"Inflation, while still high, has declined to its lowest level since 1986. Also, partly reflecting the increase in oil prices and the accelerated restocking of raw materials and intermediate goods, imports picked up significantly in the first four months of 2000. To ensure the attainment of the end-year inflation target, as well as to minimize risks to the external accounts, the authorities have appropriately committed themselves to strengthening the macroeconomic framework through firm fiscal policy implementation, particularly in the area of primary expenditure, as indicated above. They also stand ready to introduce additional fiscal measures if warranted by macroeconomic developments. The continued strict implementation of the program should help minimize any latent risks to both inflation and the external balance.

"A key contribution to the further fall in inflation will continue to come from rigorous implementation of the monetary and exchange rate framework introduced in early 2000. Specifically, the execution of the no-sterilization rule has provided additional credibility to the program. However, an early decision on the monetary framework that will, over the medium term, replace the existing one, as envisaged in the program, would help sustain credibility and further reduce long-term interest rates.

"Progress in the area of structural reform has continued, albeit with some delays. The recent approval of the law on agricultural state cooperatives and the decision to increase wheat prices in line with program commitments are key steps in reforming agricultural policies. The privatization program has remained on track and, with some delay, the privatization of Turk Telecom has now been launched. Efforts to accelerate the privatization process are needed. Progress in making the Bank Supervision and Regulation Agency operational ahead of the end-August program deadline is welcome. The Turkish authorities are encouraged to proceed speedily to the restructuring and eventual privatization of the banks taken over by the Saving Deposit Insurance Fund. In addition, the structural component of the program has been reinforced by the authorities’ commitments under the Economic Reform Loan recently approved by the World Bank.

"The authorities have completed a fiscal transparency Report on the Observance of Standards and Codes, and the Board welcomed their intention to publish it," Fischer said.

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