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Cablegate: Update On Progress On Imf Review

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

UNCLAS ANKARA 003693

SIPDIS


SENSITIVE


STATE FOR E, EUR/SE AND EB/IFD
TREASURY FOR OASIA - MILLS AND LEICHTER
NSC FOR QUANRUD AND BRYZA


E.O. 12958: N/A
TAGS: EFIN ECON PREL TU
SUBJECT: UPDATE ON PROGRESS ON IMF REVIEW


REF: ANKARA 3536


1. (SBU) IMF ResRep (strictly protect) told us late today
that he was not thrilled with the GOT's rate of progress
toward meeting the conditions for the upcoming Fifth Review
of the program. He expressed doubt that the government would
be able to complete all of the outstanding work in time for
the Fund Board to meet this month.


2. (SBU) On the fiscal side, Treasury U/S Ibrahim Canakci
told us June 5 that the bureaucracy had identified measures
to close most of this year's projected gap, but still had to
present those measures to the Prime Minister for "reaction."
Meanwhile, he and his staff continue to work with other
Ministries, including the Energy Ministry, to identify
additional measures. IMF ResRep was slightly more negative.
He said the May figures (which came in June 5) for the
Central Government budget were "pretty bad," confirming a
problematic fiscal trend. His understanding is that the
measures the government has identified so far would close
only one-half of the fiscal gap. However, the government
also has announced cutting taxes on cars (to spur domestic
demand) and reducing electricity prices for exporters. All in
all, ResRep believes the Fund and GOT are still some distance
away from completing the fiscal side of the LOI.


3. (SBU) On the structural side, Canakci said the government
had decided to put some priority legislation on Turkey's
version of the "fast track" (by making them "fundamental
laws"). As of June 5, Parliament was discussing this
approach for the critical legislation affecting Turkey's
three social security funds. He predicted (correctly) that
Parliament would pass the Foreign Investment Law that
evening, and noted that it was moving ahead on bankruptcy and
other legislation. IMF ResRep noted that the Fund and GOT
had not yet agreed on the "arrears rescheduling" language in
the social security legislation. Here, the Fund is insisting
that the legislation make clear that any rescheduling of
arrears would not be generalized. ResRep confirmed that the
GOT was making good progress on the eight structural
benchmarks.


4. (SBU) Canakci (privately) and State Minister Babacan
(publicly) both continue to express hope that the review can
be completed this month, although both acknowledged the
possibility of a delay. As noted above, ResRep thinks a
Board meeting by end-June is increasingly unlikely.


4. (SBU)


3. (SBU)
PEARSON

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