IMF says Turkey can resolve economic problems alone

Turkey can resolve its economic problems without the assistance of the International Monetary Fund, said Donal McGettigan, the IMF’s mission chief to Turkey.

The Turkish government needs to move its focus to achieving higher and more sustainable medium-term economic growth, McGettigan said, according to state-run Anadolu news agency.

“Although Turkey’s vulnerabilities remain high, they can be solved domestically if the right policies are put in place,” McGettigan said in an interview, Anadolu reported on Wednesday.

Turkey is recovering from a deep economic downturn sparked by a currency crisis in the summer of 2018. President Recep Tayyip Erdoğan has rejected suggestions that Turkey should sign an IMF loan agreement and has pursued tax cuts, loan incentives and increased government spending to help revive economic growth. Vulnerabilities remain, particularly in the banking industry, where bad debt has piled up.

Steps the Turkish government needs to take include repairing the balance sheets of private sector companies, bolstering the budget and restoring the credibility and independence of economic institutions, McGettigan said.

Turkey’s central bank is under pressure to reduce interest rates to support the government’s economic growth drive. The bank was rendered independent under a previous IMF agreement, but Erdoğan sacked and replaced its chief in July for failing to lower interest rates.

The government’s economic programme envisages increasing debt sales next year in order to maintain higher levels of spending, reflected in a widening budget deficit.