Jun 19 2019

Turkey being forced into IMF programme, Erdoğan says

(Story was updated with recent IMF comments from the 15th paragraph.)

Turkish President Recep Tayyip Erdoğan said there were attempts to force Turkey into a new International Monetary Fund loan programme in order to make the country subservient.

Turkey finished repaying $23.5 billion of debts to the IMF in 2013 and now the central bank has increased its reserves of foreign currency to about $90 billion from $27.5 billion, Erdoğan said in a speech at a dinner in Istanbul late on Tuesday.

“They want to see a Turkey like before, a Turkey that went cap in hand to the IMF,” Erdoğan said, according to local media, including news website Gazete Duvar.

Some investors in Turkey say the country should apply for a new loan accord with the IMF after a currency crisis last year sent shock-waves through its economy. The programme would help the country deal with a mounting pile of foreign currency-denominated corporate debt, plug holes in the budget and guarantee central bank independence, they say.

But Erdoğan said that calls for an IMF programme were motivated by discomfort over Turkey’s economic and political successes. Hence, there has been a campaign to blacken Turkey’s name and target the country over the past five to six years, he said.

“This is the motivation for increasing doses of threatening language towards our country, of the smearing campaigns in the international media,” he said.

A latest example of this trend was France, which is now protesting Turkish drilling activities in the eastern Mediterranean even though it has no coastline in the region, Erdoğan said.

The European Union has warned Turkey to cease exploring for natural gas off the ethnically divided island of Cyprus, which is represented by the Greek Cypriot south of the island in international organisations. Turkey says it has the right to drill there and Turkish Cypriots should have a share of gas revenues.

Turkey under Erdoğan has been growing increasingly intolerant of criticism. The Turkish president has blamed foreign adversaries for a currency crisis that tipped the economy into a recession late last year. He is now embroiled in a political spat with the United States over the purchase of S-400 air defence missiles from Russia, a move that could provoke economic sanctions.

Last week, a Turkish prosecutor opened a case against 38 people, including two Bloomberg reporters, other journalists and economists, accusing them of seeking to destabilise the economy. The charges focused on an article written by Bloomberg, which said banks were having trouble meeting demand for foreign currency as the lira plummeted to a record low last August.

On Friday, the Treasury and Finance Ministry, which is controlled by Erdogan's son-in-law Berat Albayrak, slammed a decision by Moody's to cut Turkey's sovereign debt rating further into junk territory. The ruling was biased and conflicted with Turkey's economic realities, it said.

While the IMF stands ready to help Turkey, the government has had little success in raising funds from other possible lenders. During last year's economic turmoil, Erdoğan struck a deal with regional ally Qatar to supply some capital. In August, Qatar agreed to supply Turkey's central bank with $3 billion in currency swaps. It made a further pledge of $12 billion in investment, but there has been no official announcement of any further financial aid.

Tax cuts and other short-term measures made by the government to support the economy have widened the country's budget deficit to 68 percent of its year-end goal in the first four months of 2019. Tax revenue is failing to keep up with spending.

Some economists say Turkey might require upward of $50 billion in extra funding.

Late last month, the IMF called on Turkey to ensure economic and financial stability, saying the government should introduce a comprehensive package of reforms.

There has been no indication that the Turkish authorities are contemplating making a request for financial assistance, IMF communications director Gerry Rice said on May 23.