Turkey needs to decide whether it will sign a new deal with the International Monetary Fund and remove a key uncertainty, Central Bank Governor Durmus Yilmaz told NTV broadcaster on Monday. Yilmaz said Turkey did not need IMF credit but did require some sort of anchor to underpin its economy, which has seen growth slow over the past two years, and investor confidence in it.
Turkey's three-year $10 billion loan deal with the IMF expired in May. Prime Minister Tayyip Erdogan said last month talks on a follow-up agreement had reached the final stage and a decision was expected in October or November.
"What matters the most with regard to the IMF is to remove uncertainty. It should be clear whether there will be an agreement or not," Yilmaz said. Economists have questioned the government's reluctance to push ahead with a new deal given the worsening economic outlook in Turkey and abroad.
Erdogan has resisted a new deal because he wanted to show voters in municipal elections next March that his government has strengthened the economy to the point that it no longer needed the aid of the IMF, economists say. The market favours a precautionary stand-by deal due to Turkey's vulnerability to shifts in global liquidity because of its huge current account deficit, largely funded by foreign investment and government borrowing.
Turkey has to agree to some form of agreement because it still owes the fund some $6 billion. The Turkish Central Bank would continue to inject the liquidity the market needs, and it will move fast if a liquidity shortage emerges, Yilmaz said.
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