Turkey slams talk of IMF aid as perception operation

Turkey slammed talk of a possible new loan programme with the International Monetary Fund as a “perception operation”.

Such speculation is designed to damage the government, the country’s economy and the Turkish nation, said the Treasury and Finance Ministry, which is led by Berat Albayrak, the son-in-law of President Recep Tayyip Erdoğan. 

“This diseased mood has reached a dangerous dimension,” the ministry said in a written statement on its website on Friday.

Some economists and analysts say Turkey may need funding from the IMF to help bolster economic growth and fund the private sector following a currency crisis last year that wiped nearly a third of the value off the lira. Speculation has mounted that the ruling Justice and Development Party (AKP) may apply to the fund after nationwide local elections on March 31 amid an economic contraction and a reduction in revenue needed to support a recovery.

The government is amazed that “lies and slander” regarding the state of the economy are continuing, the ministry said. Turkey’s economy is strong and no finance or technical assistance from the IMF is required, it said.

Turkey has one of the lowest sovereign debt-to-GDP ratios among emerging markets. Its inflation rate, however, stands at 20.3 percent, second only to crisis-hit Argentina among major emerging markets. Turkish corporations are also saddled with more than $220 billion of long-term foreign currency loans, which have become more expensive to repay.

The government pledged late last year to carry out a stress test of the nation’s banks to ascertain whether they need extra capital. The results of the assessment have not been released.

Erdoğan has repeatedly stated that Turkey has no intention of applying to the IMF for financial help or any assistance with economic reform.

Turkey is lacking an anchor for its economy after the European Union froze negotiations on membership and a previous IMF accord ended in May 2008. It repaid the last remaining loans from the fund in 2013. It has signed a total of 19 stand-by agreements with the Washington-based institution.

Foreign capital flows have given impetus to the private sector and ruled out the necessity of IMF financing, former Deputy Prime Minister Ali Babacan, who was in charge of Turkey’s economy, said as the last IMF loans were repaid in May 2013.

Capital flows have since fallen markedly, particularly in the aftermath of a failed military coup in 2016 and after concerns heightened last year that Turkey’s economy was overheating.

Many Western countries have also cut back on investment after Erdoğan tightened his grip on power and reversed some democratic reforms. He gained vast new powers as president at an election last June, when he also appointed Albayrak to replace Mehmet Simsek, a former Merrill Lynch banker, as minister responsible for the economy.