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TURKEY - Sept. 19 - Inflation Dispute Stalls IMF Deal.

IMF officials conclude their talks in Ankara without finalising the inflation target for 2002, a necessary step before the release of the next $3 bn tranche backing the country's economic reform programme. (The inflation is expected to reach 61% in 2001 after the Feb. devaluation reversed progress marked by a fall in inflation to 39% in 2000). Ankara officials are to continue talks with the IMF in Washington soon. Economy Minister Kemal Dervis says the priority should be to set a credible inflation target, and do better, rather than an over-ambitious target and miss it. He tells the FT: "We have a significant disagreement with the fund on how much disinflation there should be next year. Given the extent of the recession, we believe it should be gentler". He says the recession in 2001 would be even sharper than the 5.5% contraction the government foresaw in July. He foresees a shrinkage of GDP of 7%, to be followed by a recovery of 5% in 2002. He blames a "more severe than desirable" credit squeeze by public sector banks in throes of restructuring, poor agricultural production, and the world economic slowdown. The credit crunch has "a lot to do with the corruption issue", he says, adding that anti-corruption measures made officials "afraid to sign anything". He says banking reform remains the most important achievement of the economic programme. He also points to success in achieving a primary budget surplus of 5.5% of GDP. Ankara would still seek to borrow $1.5 bn in the international bond markets later this year, to help repay some $2 bn to existing bondholders. Earlier, Dervis said the government would have to borrow $5 bn on the international financial markets in 2002.
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Publication:APS Diplomat Recorder
Article Type:Brief Article
Geographic Code:7TURK
Date:Sep 22, 2001
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