Turkish PM says IMF talks over, rules out loan deal

TURKEY and the International Monetary Fund have called off loan talks because the country does not need emergency funds, the prime minister said yesterday, ending nearly two years of talks dogged by disagreement on key issues.

"At this point, Turkey's outlook as a country that is able to stand on its own feet economically has led the IMF to also believe that there is no need for a stand-by (loan) deal," Prime Minister Recep Tayyip Erdogan said in televised remarks. "We have jointly reached the conclusion that there will be no agreement."

Erdogan cited failure to reach accord with the IMF on many issues as one of the reasons ruling out a loan facility. "We have principles and it is out of the question for us to make concessions on these. I have already said we would not say 'yes' to such demands," he added. Erdogan has often accused the IMF of making "political demands," objecting to proposals to make the country's tax body autonomous, reduce payments to local administrations and pressing taxpayers to declare the source of their income. The IMF has never disclosed details of its differences with the Turkish government.

Earlier yesterday, Economy Minister Ali Babacan suggested that the talks had been put on hold but left the door open to the possibility of resuming them. "We thought it would be beneficial for us and them (the IMF) to take a break and look ahead," Babacan said, noting that a stand-by deal was "not an urgent need, an obligation.

"There will be no talks on a deal until May" when an IMF staff mission will visit Turkey to evaluate the country's economic outlook and policy plans, the first such visit in three years, he added. Turkey and the IMF have been discussing for nearly two years the terms of a fresh stand-by deal since a 10-billion-dollar programme expired in May 2008.

IMF stand-by deals come with conditions attached, setting down guidelines and commitments for recipient governments that can be very unpopular as they usually entail spending cuts to help restore public finances.

Business circles and financial markets had been pressing the government for a new IMF deal as the global financial crisis plunged the country into a recession but they had largely given up hope of seeing an accord.

"The government does not have sufficient incentives to agree to a deal with the IMF in view of the ongoing sequential recovery and recent credit rating upgrades," Inan Demir, chief economist at Finansbank, said in a research note.

In January, international ratings agency Moody's upgraded Turkey's debt and changed the outlook from stable to positive, with Standard & Poor's taking a similar line last month. AFP