Turkish economists debate end of IMF standby deal

The decision to halt standby loan talks with the International Monetary Fund stirs debate in the media as economy columnists warn of pitfalls ahead. While some note with pleasure that the IMF is out of the picture now, most say the ‘Fiscal Rule’ that the government has been promising is long overdue.

Last week’s announcement ending the months-long flirtation between Turkey and the International Monetary Fund stirred another debate as economy columnists pointed toward potential pitfalls ahead and emphasized that Turkey should embrace fiscal discipline whether an IMF standby is in place or not. They also noted the threat of “populist policies” before next year’s general elections.

“Turkey’s decision ... is a crushing defeat for those who maintained that a standby was an imperative,” said Asaf Savaş Akat in his March 11 column in Vatan newspaper.

“Attempts to force the government into an IMF deal were exercises in futility,” Akat said, adding that the government has taken a “historic” decision. “We thank the IMF for its previous support. Let us forgive its mistakes, too. But we should strive not to fall into its hands again.”

Writing in business daily Referans, Tevfik Aksoy, chief economist at Morgan Stanley in London, said an anchor, which “was preventing the pricing of risks,” no longer exists after the decision. Agreeing with the prevalent view that the government used the prospect of a standby as a “virtual anchor,” Aksoy commended policy-makers for accomplishing this feat for 18 months without paying a cost.

“Turkey now has to obtain an alternative and dependable anchor, as it has called off a key anchor,” he wrote on March 13. “I believe Fiscal Rule, expected to be made into law over the next few months, is the best and maybe the only alternative.”

The expected Fiscal Rule will lay down long-term targets for budget deficit and borrowing requirements. Turkey has reduced total debt as a percentage of gross domestic product, or GDP, to 43 percent last year from 67 percent in 2003.

Aksoy noted that a total of 80 countries implement Fiscal Rule policies that continue regardless of political hurdles, such as general elections.


/Hurriyet Daily News/