Describing Turkey's current economic position as "the strongest in a generation," the International Monetary Fund has approved a new three-year stand-by loan to Ankara worth $10 billion. The IMF's action could help Turkish leaders keep the country's move to join the European Union on track.
The IMF's Executive Board approved on May 11 a Turkish letter-of-intent covering the loan. An initial tranche of $837.5 million was extended to Ankara the same day. The IMF also gave Turkey an additional year to make a $3.8-billion debt payment. The payment had originally been due in 2006.
In agreeing to the new loan, which follows up on a three-year deal worth about $19 billion, the IMF said it expected Turkey to stick to a primary surplus target of 6.5 percent of Gross National Product, helping to country to reduce its public debt and control its current account deficit. In 2004, the Turkish government recorded a primary surplus of 6.9 percent, while presiding over a 9.9 percent economic growth rate. The government also succeeded in keeping inflation at 9.3 percent, its lowest level in decades.
"Through their strong policies, the Turkish authorities have transformed Turkey's economic performance, while reforms associated with EU accession negotiations hold out the promise for further economic advance," IMF Managing Director Rodrigo de Rato said in a written statement. "Turkey deserves the support of the international community on the strength of its impressive track record."
News of the loan agreement produced elation among members of the Turkish government. Economics Minister Ali Babacan said the new stand-by agreement showed that the financial crisis in Turkey, which began in 2001, was over. [For background see the Eurasia Insight archive]. Babacan also expressed confidence that Turkey would not encounter difficulty in paying off the loan after 2008. Officials say the government will now begin implementation of a program designed to reduce unemployment, attract foreign investment and harmonize the country's economic framework with that of the European Union.
Turkey received a tentative go-ahead from the EU last December to start accession talks. [For background see the Eurasia Insight archive]. Since then, Turkish officials have struggled to keep the accession process on track, as the notion of Turkish membership in the EU continues to generate strong opposition within the grouping. The favorable portrait of the Turkish economy painted by the IMF could help convince reluctant EU members that Turkish participation in the organization would not cause undue economic or political disruption.
On May 12, a new potential obstacle to Turkey's EU-membership drive arose when the Strasbourg-based European Court of Human Rights (ECHR) ruled that Abdullah Ocalan the former leader of the PKK, a militant Kurdish separatist organization -- did not receive a fair trial in 1999. The Strasbourg court called for a retrial, saying the tribunal that tried Ocalan in 1999 was not impartial. Following the 1999 trial, Ocalan received a death sentence for his actions during the PKK's two-decade-long struggle to secure a Kurdish homeland. The sentence was subsequently reduced to life in prison.
The EU Commission issued a statement saying that it would closely monitor Turkey's response to the ECHR ruling. The day before the ECHR ruling, Olli Rehn, the EU's commissioner for enlargement, indicated that Turkish accession talks would begin as scheduled on October 3.
Mevlut Katik is a London-based journalist and analyst. He is a former BBC correspondent and also worked for The Economist group.
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