AGENCY MATERIAL and INTERNATIONAL STAFF

This selection first appeared in the Financial Times on 23 December 2000.

Turkey has promised the International Monetary Fund that it will meet a number of stringent economic targets as part of a deal that gives it US$7.5bn to help the country get over a banking crisis.

In a letter of intent published yesterday, the government promised to speed up the sale of state-owned assets and clean up its banks, and commits itself to strict fiscal discipline and an exchange rate policy aimed at squeezing inflation out.

Its promise to maintain its policy of a depreciating exchange rate worries many analysts. Moody's Investors Services suggested recently that Turkey's banking crisis would force faster depreciation and wider trading bands.

Turkey promised it would maintain pre-announced exchange rates in the first half of 2001 and gradually widen trading bands for the lira in the second half of 2001.

Lira depreciation is now 1 percent monthly, planned to fall to 0.9 percent in the first quarter of 2001, and 0.85 percent in the second quarter. The fluctuation band is seen at 7.5 percent at end-2001, 15 percent at end-June 2001 and 22.5 percent at end-2002.

Turkey also promised the IMF that it will trim the budget of its powerful military. But the generals, who have promised support for efforts to slash inflation, also have plans to spend billions of dollars on new equipment.

The letter of intent also reveals that Turkey will announce 29 power plant projects worth about US$1.5bn this month. The projects would be carried out under the build-operate-transfer model and be the last ones guaranteed by the treasury provided they are commissioned by end-2002. The measure is intended to relieve the state of the burden of backing expensive energy projects.

Privatisation receipts in 2001 are expected to double from the US$3.5bn likely this year.

The target for real gross national product growth in 2001 is 4-4.5 percent, accelerating to 5-6 percent in 2002.

In a statement released by the French finance ministry as president of the Ecofin Council, euro-zone finance ministers lent their support to Turkey yesterday saying they welcomed the programme of economic reforms.

Copyright: The Financial Times Limited