“We Are Working On A New Program With The Imf”

The economy is going through a very difficult period... On the one hand there is a global credit crisis, and on the other political instability. There are a lot of “critical” questions in the minds of the business community. As he answered questions about such important topics as inflation, exchange rates, growth and foreign capital outflow, Deputy Prime Minister Nazım Ekren explained the strategies that will be applied in the future...

First of all, let’s give the answer to the question everybody is asking: the government intends continuing working with the IMF. Preparations are currently being made for a new program. Another program which is being prepared and which will be announced at the beginning of the month will be a Medium Term Financial Program, which will set medium-term financial indicators or targets. Economics professor, State Minister responsible for economic coordination and Deputy Prime Miniter Professor Nazım Ekren notes that 7 percent growth is important both to solve the problem of unemployment and to meet the economy’s needs. He gave some firm information about the program’s perspective by saying: “In a world which is caught between inflation and deflation, it would be wrong to draw up a program as if Turkey won’t be affected at all.” In the program, the target for per capita national income in 2013 has been revised from the figure of US$10,000 previously announced by the prime minister to US$15,000. Ekren believes that the figure of US$10,000 will be attained by the end of the year.

In an environment where uncertainties both inside and outside Turkey have grown and increased the questions hanging over the economy, Deputy Prime Minister Prof. Dr. Nazım Erken gave clear and sincere answers on all the issues around which there are question marks, such as the party closure case, the relocation of the Central Bank and the possibility of a new agreement with the IMF. Here are Ekren’s responses to Capital’s questions:

- Have the conditions prevailing in the global financial sector begun to be reflected in the Turkish economy. What are your observations and findings in this regard?
The impact of the current situation, and the manner in which it affects developing countries such as Turkey, cannot be limited to just capital movements and developments. The recent rise in oil process shows that a second supply shock is coming from energy and derivatives. The countries which sell these products are faced with another supply shock.

Another supply shock is the change in the prices of basic foodstuffs as the result of drought and global warming. Turkey is probably and actually one of the countries faced with these three supply shocks. We want to manage this process at the lowest cost. But there is no possibility of not being affected. In a global economy all economies are tied to each other. The way in which they are affected may be from foreign trade or capital movements.

- Mehmet Şimşek has announced that US$2 billion in foreign capital has left the country since the beginning of the year. Are there any measures you are thinking of taking in terms of economic management against the possibility of an increase in foreign capital outflow and, if so, what are they?
Outflows are just as normal a part of international economic interdependence as inflows. The outflows look a lot because there was little inflow of foreign capital when compared with the past. There are corrections in all economic fluctuations. If there is an imbalance in Turkey then, over time, a correction will appear. But there should not be a major discrepancy between the expected correction and the fluctuations that occur. The duty of both the private sector and those who run the economy is to take measures to ensure that the fluctuations are not larger than the necessary correction.

-  Inflation has finally returned to double digits. Do you think it will stay there? When do you think single digit inflation will be possible?
A return to double digit inflation was not included in any of the political documents. It was not among our targets. The Central Bank’s updating of inflation targets is entirely its own decision. The new targets are in keeping with the conditions in Turkey and the rest of the world. One should not debate the credibility of the Central Bank because it insisted on a medium-term target of 4 percent for inflation. As the government, we always provide our support. As we are also looking at it in terms of reducing inflation, there is no question of their being a different approach.

- Everybody is wondering whether or not the government will sign a new agreement with the IMF. What will be the government’s position on this?
We published schedules that will continue until 2013 as part of the EU process. As a result, the anchor continues as before. It is just that, as the result of political developments, whether it increases or decreases, the essence of what we are doing is a EU Republic Project. This is a method for achieving the level of contemporary civilizations. In any case, this will continue. Coming to relations with the IMF, the IMF represents the international community. We are one of the members of the institution. There are two important points in our relations with the IMF. The type of relationship we have when we utilise a loan from the IMF, and the type of relationship when we do not utilize a loan. But, in the end, the IMF monitors and prepares reports on each and every one of its members. When the first program finished in 2004, we did not sign an agreement until April the following year. But we were going to sign. Article 4 (post-program monitoring) immediately came into effect and that process was closed. The current situation is no different. The program has once again finished but, during the process of preparing for a second program, the 1-2 months after the program are a normal monitoring process. The authorized minister will work on this. When we are presented with a proposal, we shall say: “In a time of global turbulence, Turkey needs this. This is what we have decided.”

What Will Be The 3 Basic Parameters In The New Incentive System

1. Regional Differentiation Is Coming
 You will have the possibility of receiving an incentive, however small, in the sector in which you have decided to invest, wherever you have decided to invest anywhere in Turkey. Because the opportunities and resources in every region are not the same, it is inevitable that the state’s incentive system will take this into account.  

2. Sectoral Incentives
In terms of sectors, not every sector fulfils the same function in every region.  We shall determine the regional distribution of sectors. The ministry will determine which sectors have an advantage in which regions. We shall also include this in the system.

3. Employment And Investment Totals
In addition to all of these, if employment, investments and exports exceed a certain total, we want to support these investments with a special incentive system, completely separate from the other system.

Asli Işik
[email protected]

Erdal İpekeşen
[email protected]