(Zaman) - The International Monetary Fund (IMF), which has signed a $10 billion agreement with Ankara, has welcomed Turkeys reforms in line with the program.
Following the enactment of the Social Security Reform Bill, the IMF completed the third and fourth reviews of Turkeys economic program on condition of that Turkey reduce its medical expenditures by 4.5 billion new Turkish liras (YTL).
The IMF Executive Board approved $1.9 billion in credit to Turkey. The credit will be delivered to the Turkish Treasury in August, reports Trend.
IMF Chairman Rodrigo de Rato released a statement regarding recent economic developments in Turkey, praising its achievements but issuing a warning that inflation targets might have to be revised due to hikes in the foreign exchange.
According to de Rato, Turkey was affected by recent global fluctuations more than other developing markets; however, the government and the Central Bank responded appropriately by tightening macroeconomic policies and reinvigorating structural reforms.
The policies which were implemented to perpetuate high growth and low inflation and to reduce the debilitating effects of sudden changes in the economy should continue.
"The authorities' efforts to regain investor confidence by tightening monetary and fiscal policies and by renewing their commitment to structural reform deserve the support of the international community," said de Rato.
Turkeys strong economic performance has been achieved by record-high capital inflow, decreasing debt rates, and strengthening of the lira, said de Rato. He suggested that some shocks caused hikes in current account deficits and inflation
De Rato welcomes the Central Banks commitment to fight inflation.
He expects the stability in fiscal markets that was achieved by raising interest rates and withdrawing YTL liquidity from the market to control inflation expectations.
De Rato sees the floating exchange as a security valve, and defends it as the best exchange rate regime for Turkey.
State banks should be privatized
De Rato said Turkish officials have taken steps to overcome surplus before interest payment that was expected to account for 6.5 percent of the GNP, and decided to save the income surplus. He stated nominal spending should be kept within the program framework and tax base should be preserved to achieve these goals.
De Rato said preserving growth rates and market confidence would contribute to reducing vulnerability.
According to the IMF Chairman, implementing the newly-enacted administrative and retirement reform bills will be the key to preserving the medium-term fiscal position.
De Rato is committed to improving Income and Corporations Taxes.
However, De Rato cautioned that state banks should be privatized so that the efficiency of financial system could be enhanced and the investment atmosphere strengthened.