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Cablegate: Turkey's Economy: Imf Staff See Little to No

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS ANKARA 001033

SIPDIS


SENSITIVE


STATE FOR E, P, EB AND EUR/SE
TREASURY FOR U/S TAYLOR
STATE PASS USTR - NOVELLI AND MOWERY


E.O. 12958: N/A
TAGS: ECON EFIN PREL TU
SUBJECT: TURKEY'S ECONOMY: IMF STAFF SEE LITTLE TO NO
PROGRESS ON FOURTH REVIEW


Sensitive but unclassified. Not for internet distribution.


1. (SBU) On February 12, IMF resrep told us the IMF Mission
currently in Ankara has achieved little to no progress on the
Fourth Review. On the budget side, there was agreement on
technical adjustments to the draft baseline that decreased
the primary surplus shortfall to about 2.25 percent of GNP
(about $4.6 billion), but no GOT acceptance of new measures.
There has been no progress on the structural reform
conditions (principally: overstaffing in the public sector
workforce; privatization plan for TEKEL; direct tax reform;
banking sector reforms.).


2. (SBU) 2003 budget. IMF staff returned to Ankara to
complete the Fourth Review based on two understandings: that
the GOT agreed to the IMF assessment of a 3.1 percent of GNP
primary surplus shortfall in the draft 2003 budget (which was
reduced to 2.5 percent through additional measures); and that
the GOT was committed to identifying further measures, from
an IMF list of suggested measures, to close the shortfall.
Resrep told us there has been no progress on identifying new
measures. Instead, the GOT officials led by Treasury U/S
Oztrak are arguing over definitions of primary spending,
trying to cut out of the baseline certain expenditures (the
main issue here is over foreign-financed in-kind supplies,
for instance, dam building equipment, which amounts to about
0.75 percent of GNP.) IMF staff has agreed to several
technical adjustments to the baseline that bring down the
shortfall to 2.25 percent of GNP (about TL 8 quadrillion or
$4.6 billion).


3. (SBU) Letter of Intent. The GOT gave IMF staff a revised
LOI on February 10, drafted by Treasury and State Planning
staff without political level clearance. IMF staff is now
re-drafting it. State Minister Babacan told IMF Mission
Chief Kahkonen on Feb. 10 that he hadn't yet read the entire
LOI. Resrep opined that this lack of cabinet-level approval
belies the AK claim of political ownership of the reform
program.


4. (SBU) Comment: IMF resrep believes the GOT is stalling
in the hope that State Minister Babacan, now en route to
Washington, will obtain USG understanding (and consequent
pressure on IMF staff) to agree to "water down" the Fourth
Review conditions.
PEARSON

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