Turkey should pursue fiscal policy to reduce inflation rate, says IMF

Turkey should implement a fiscal policy aimed at reducing the inflation rate that touches the 20 percent limit, Asharq Al-Awsat quoted International Monetary Fund (IMF) Managing Director Paul Thompson as saying on Sunday.

Transparency, continuing to tighten monetary policies, ensuring the independence of the central bank, monitoring developments in the financial sector and taking measures against any bad situation are steps Ankara should take, IMF’s Thompson noted on the sidelines of the spring meetings of the IMF/World Bank in Washington.

Thompson’s analysis arrives as Turkish consumer prices rose 19.7 per cent from a year earlier in March, with the core measure that strips out the impact of volatile items such as gold, food and energy dropping to 17.5 per cent.

Inflation in the country surged last year after Turkish consumers and investors sold the lira due to concerns about an overheating economy and a political spat with the United States, which saw the country’s currency sink by 28 percent against the dollar. 

Noting that the Turkish economy is currently in a recession, the IMF official said Ankara is able to overcome this stage through structural reforms.

Ankara has taken important measures over the past six months and must continue its anti-inflation policies, Thompson said while stressing there were no current talks between Turkey and IMF for loans.

Speculation is mounting that Turkish President Recep Tayyip Erdoğan may be forced to drop his opposition to an IMF loan accord that would help lift Turkey out of an economic recession.

Turkish Minister of Finance and Treasury Berat Albayrak this week disclosed a new economic programme, which the Turkish government pledged to deliver ahead of local elections, promising to inject 28 billion lira ($4.9 billion) of fresh capital into the country’s state-owned banks. Albayrak also travelled to Washington for meetings with investors, as well as with the officials of the international economic institutions.

The minister’s upbeat view of Turkey’s expected rebound failed to resonate in Washington, Asharq Al-Awsat quoted sources, who requested anonymity, as saying.