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Cablegate: Turkish Economy April 1: Markets Await Imf Good

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

011203Z Apr 03

UNCLAS ANKARA 002133

SIPDIS


SENSITIVE


STATE FOR E, P, EUR/SE AND EB
TREASURY FOR U/S TAYLOR AND OASIA - MILLS
NSC FOR QUANRUD AND BRYZA


E.O. 12958: N/A
TAGS: ECON PREL TU
SUBJECT: TURKISH ECONOMY APRIL 1: MARKETS AWAIT IMF GOOD
NEWS EXPECTED THIS WEEK


REF: ANKARA 2094


Sensitive but unclassified, and not for internet
distribution.


Markets Quiet; Awaiting IMF Good News
-------------------------------------


1. (U) Transactions volumes in Turkish financial markets
were very low on April 1 am. T-bill yields were unchanged
at 65 percent compounded, the lira appreciated slightly to TL
1,702,000, and the Istanbul Stock Exchange 100 index was up 1
percent. Stock market transaction volume has averaged at
about $100 million per day over the past week (normal average
daily volume is nearly $500 million). Traders told us
markets are awaiting news on the IMF Fourth Review. There is
also some expectation in the local markets of a U.S. loan
package of $8.5 billion, with the first tranche coming in the
May/June time-frame, though TV news analysts are reporting on
April 1 am of concerns in Congress that may reduce this
package for Turkey.


IMF and World Bank Updates
--------------------------


2. (SBU) IMF resrep told us Deputy Managing Director Krueger
received the LOI for review on the evening of March 31. The
Turks had resolved the few remaining issues: they closed the
investigation into BRSA's intervention of Pamukbank; they
agreed to enhanced quarterly monitoring of the state banks by
BRSA bank auditors (this became necessary after the GOT
replaced the state bank board, reftel). Resrep said there
were no other significant changes to the final LOI. If IMF
senior management approve the LOI April 1, then the Turks
would plan to sign it April 2. MinState Babacan is planning
a press conference to announce the signing, and would also
announce the revised schedule for eliminating redundant job
in the state enterprises (a 4th Review prior action). IMF
staff also expect Babacan to press the Fund to announce a 4th
Review board date this week.


3. (SBU) Asked about Deputy PM Sener's press comments this
week promising a rescheduling of Ziraat Bank loans to
farmers, IMF resrep said he saw those comments and they were
nothing new. This is a long-term project of the AKP. If the
loans were rescheduled on commercial terms, that was okay; if
AKP plans a wholesale rescheduling of a class of loans, that
would contradict an LOI undertaking, and the IMF would
object.


4. (SBU) World Bank economist Parks told us April 1 that the
Bank had extended its pending adjustment loans to Turkey that
were due to expire March 31. The revised 2003 disbursement
schedule over 2003 is: $550 million in June; $825 million in
December. (Comment: One of the structural conditions for
the World Bank's June disbursement is privatization of
state-owned Vakifbank. The World Bank has agreed to accept
Vakifbank's sale to its employees' pension fund as meeting
this condition.)


GOT Proposes Voluntary "Sacrifice" Fund To Help Pay Debt
--------------------------------------------- -----------


5. (SBU) Following the March 31 Cabinet meeting, GOT
spokesman Cicek announced that work was underway to create an
"Economic Sacrifice Fund," chaired by MinState Babacan, who
would publicize his efforts within one week. The Fund would
allow Turkish citizens and corporations to donate money to
help the Government meet debt payments. Last week PM Erdogan
told the press of a similar effort, in which each citizen
would be asked to voluntarily contribute $100 to help the GOT
meet debt payments. The April 1 Radikal newspaper (low
circulation, aimed at intelligentsia) ridiculed what it
called "dream-like" solutions to Turkey's debt problems.
Bender Securities stock market analyst Golkan was more
direct, calling this project "horse-s."
PEARSON

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