"the two-year deal is expected to be signed in January" 31 December 2009
Turkish PM agreed 2-year IMF loan
The International Monetary Fund and Turkey’s government will clinch a loan deal after the global lender agreed to Ankara’s conditions, Milliyet newspaper quoted Prime Minister Tayyip Erdogan as saying on Thursday.
Turkey’s financial markets have clamoured for a stand-by deal since the previous $10 billion accord expired in May 2008, but Erdogan has rejected some demands from the IMF.
“Turkey’s conditions have been accepted,” Erdogan was quoted as telling his party’s executive board on Wednesday night.
Erdogan said the IMF called for a three-year deal but the Turkish government insisted on two years. The paper said, citing the ruling AK Party sources, that the two-year deal is expected to be signed in January.
Markets had expected a three-year deal worth as much as $50 billion.
“Emergency deals were signed in the past with the IMF because of the need for funds, but now we had our conditions accepted,” Erdogan was quoted as saying.
The IMF office in Ankara was not available to comment.
The main stock exchange index .XU100> hit its year-high, rising 1.4 percent to 52,390 points at 0757 GMT.
The Turkish lira firmed to 1.4990 against the dollar on the interbank market after the report. It closed at 1.5125 on Wednesday. The yield on the benchmark Aug. 3, 2011 bond 0#TRTSYSUM=IS> fell to 9.00 percent, versus the previous day’s 9.44 percent.
Scepticism
But there was some doubt in the markets, pending official confirmation.
“Yesterday, Economy Minister Babacan made similar yet more vague announcements regarding a proverbial IMF deal however the markets are now more sceptical because the story has been told too many times,” Tera Brokers said in a note.
Turkey and the IMF have been locked in negotiations since the previous $10 billion stand-by accord expired in May 2008, and the government blamed stringent IMF conditions for the delay.
Turkey is scheduled to hold elections in mid-2011.
Some economists said they would wait for the IMF’s confirmation of the reports.
“Note that in an interview with Wall Street Journal in October, Erdogan had stated that Turkey and IMF agreed on key sticking points; however, this statement was not verified by IMF later,” Finansbank said in a note.
“Accordingly, we will be waiting for a statement from IMF rather than relying on this admittedly vague news story,” the bank’s note added.
Economy Minister Ali Babacan said on Tuesday Turkey and the IMF have agreed that a loan deal they might sign next year would be for two years, but austere terms that might slow down recovery would be unacceptable.
Turkey’s government aims for 3.5 percent growth next year, and 6.0 percent contraction this year.
Economists said Turkey does not need IMF cash against a balance of payments problem as its external deficits shrank this year.
The main benefit of a deal in 2010 would be to stop the government crowding out private sector growth as the Treasury prepares to borrow heavily to roll over government debt.
If a deal is signed next year it will be Turkey’s 20th loan deal with the IMF.
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