Babacan: "Gov't must see benefit in IMF offer before agreeing to deal"

Speaking at a seminar on Crisis, Economic Recovery and Structural Reform in Emerging Europea and Asia on the sidelines of the ongoing annual meetings of IMF and World Bank in Istanbul over the weekend, Deputy Prime Minister and State Minister for the Economy Ali Babacan said that the main reason for not signing a long-anticipated stand-by deal with the International Monetary Fund (IMF) so far was because the government had not found the offers suggested by the fund "realistic." He said the government was not satisfied with the solutions the IMF brought to the table and that they eventually had decided that the best option was to put a medium-term economic plan into action for a way out of the current global financial crisis. Recalling that the latest stand-by deal with the fund expired in May 2008 and that no deal has been signed since then, Babacan said the government had faith in Turkey's potential and was shouldering responsibility to this end. "We have been continuing on our way without a stand-by deal since May 2008. Some are asking why this is the case. The answer is simple: We do not believe the IMF's offered solution will benefit Turkey's economy. And that is why we have announced our own economic program," Babacan noted as he underlined that they have shared their medium-term economic plan with the IMF. "The government has told the IMF that the future relationship, including a possible stand-by deal, should be in accordance with Turkey's medium-term plan. We could agree to sign a stand-by deal only if they agree to our program." Babacan recalled that the fund has welcomed the medium-term program. The head of the IMF said the Turkish government's new strategy plan "encompassed realistic macroeconomic projections." Babacan emphasized that the government did not plan its medium-term program in anticipation of an IMF deal, but rather the program was designed to work on its own without any need for foreign support. "Additional cash from the fund could help rejuvenate domestic markets and minimize the growth of unemployment; however, it is not essential," he said. Babacan underlined that nobody could underestimate the adverse impact of the crisis on the Turkish economy and that the government was aware of its responsibilities. With regards to the course of the Turkish economy in the coming period, he predicted that the Turkish economy could see growth in the final quarter of this year, and if not then in the first three months of 2010 at the latest. In related news, Sheila Bair, the head of the US Federal Deposit Insurance Corporation (FDIC), who is currently in Istanbul for the IMF-World Bank meetings, said yesterday that they had examined the measures employed by Turkey's Savings Deposit Insurance Fund (TMSF) to contain the 2001 economic crisis in the country, adding that they were implementing similar measures to fight the ongoing financial crisis in the US. "Thanks to those measures, Turkey has remarkably strengthened its financial institutions, and this made it well-prepared to face the current global economic crisis," she said. Stressing that Istanbul meetings constitute an important first step ahead to restructure the global financial system, Bair also urged developed countries to help emerging economies in their effort to weather the crisis.