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Turkey Stands Behind Vows of Economic Reform
ISTANBUL,Turkey-The Turkish government forced the resignation of a dissident cabinet minister yesterday in an attempt to convince investors it is committed to meeting the conditions of an economic rescue package from the International Monetary Fund.
Prime Minister Bulent Ecevit said Privatization Minister Yukal Yalova was being removed for making statements that seemed to show the government backing away from the program and thus "causing tremors in our economy." The Turkish currency slipped 4% to 1,210,000 lira against the dollar, bouncing back from its intraday low after the government rushed to show a united front behind the program. Stocks also initially fell about 5% before recovering to end up 2%.
Mr. Yalova, who comes from a tobacco growing region, had indicated opposition to a law that would reduce subsidies to 600,000 tobacco farmers.
Passing the Tobacco Law before yesterday's date was one of the six conditions set by the IMF to release a $1.6 billion tranche of credit in June. The rescue plan is part of what is now the IMF's biggest action in THE WORLD-a $19.6 billion line of credit to support a three-year program that started in January 2000. None of the six criteria has been met yet, but the Turkish treasury run by Economy Minister Kemal Dervis, said all will be in place before the IMF's board meting in late June.
Mr. Yalova's statements were only the latest sign of the government's foot-dragging, which has led investors to push annual interest rates to more than 90%. They have risen from about 70% after the IMF relaunched Turkey's program on May 15 in a new attempt to cure decades of high inflation and corrupt economic management.
The original program fell apart in February when inflation outstripped a currency peg and state banks were about to collapse under the weight of debt-service payments. Since then, the currency has fallen 43%, bad debts have added $30 billion to the national debt and unemployment has soared.
New "delays will be very costly for Turkey," said Ajay Chhibber,
representative of the World Bank in Turkey, who emphasized that the $6
billion of new World Bank lending over the next two years will go ahead ONLY
if the new program is implemented in a determined way.
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