A new loan deal between Turkey and the International Monetary Fund is in doubt because of a disagreement over the level of municipality spending, Deputy Prime Minister Nazim Ekren said on Saturday. The IMF and Turkey are expected to hold further talks during the Group of 20 meeting of the world's major economies on the details of Turkey's follow-up deal with the global lender after the last agreement expired, Ekren told reporters.
"It is not very easy to say whether there will be an agreement with the IMF or not," Ekren said. Ekren, who supervises economic co-ordination, also said Turkey had sufficient foreign exchange reserves for its banks to roll over their debt. "It looks that the banks can roll over 50-65 percent of their debt. There is no possibility that we fail to overcome this with the level of foreign exchange we have," Ekren said.
Turkey's $10 billion IMF stand-by deal expired in May and Prime Minister Tayyip Erdogan has said the government does not want to sign a new loan accord if the IMF programme exerted excessive constraints on budget spending, taxes, economic growth and public investments.
An IMF team was in Turkey last month after talks on the economy and a possible new agreement. Turkey's business community has been calling for another loan deal - most likely a precautionary stand-by deal - to help limit the fallout from the global financial crisis that has forced Ukraine, Hungary, Iceland and Serbia to seek IMF financial aid.
There is no disagreement between the IMF and Turkey on the level of public investments and a government decision to cut social security premium paid by employers by 5 percentage points, but the global lender objects to municipality spending, Ekren said. "There is disagreement with the IMF on the level of funds to be transferred from the central government to local administrations," he said.
Turkey will hold local elections next March and the IMF warned the authorities against increased spending for municipalities as Turkey's financial markets have been hit severely by the global financial markets. The latest data put Turkey's foreign exchange reserves at $72 billion, the latest data shows.