Turmoil in Turkey

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Finanicial Times

 

Turkish markets buckle on IMF loan delay

By Paivi Munter in London

Published: July 6 2001 16:13GMT | Last Updated: July 6 2001 17:14GMT

 

Turkish financial markets fell sharply on Friday after Kemal Dervis, the economics minister, failed to secure Turkey the next $1.5bn loan tranche from the International Monetary Fund after talks in Washington.

 

Amid a panicky sentiment, the lira fell to an all-time low TL1,334,000 to the dollar, some 50 per cent below its value before the currency’s devaluation in February.

 

Meanwhile, the ISE National-100 stock index gave up fell 9 per cent at to 10,168.80. The sides’ disageement between the IMF and Turkey centres the structure of on a supervisory board being created to oversee Turkish Telecom, the country’s dominant operator, slated which is being preparted for privatisation under the IMF-led, $15.7bn rescue programme.

 

The IMF has questioned the professional credentials of some of the members appointed to the board, but representatives of the nationalists in Turkey’s coalition government insist Ankara has met all its obligations under the loan programme.

 

But analysts said on Friday that the spat disagreement was risking was threatening to provoke another collapse on Turkey’s financial markets - after the crises in November and February - a prospect that would threaten the country’s political stability.

 

"If it (the dispute) continues it could be pretty terminal for the Turkish markets," said Timothy Ash, emerging markets economist at Bear Stearns in London.

 

Mr Ash said the biggest risk to Turkey’s financial stability lies on the domestic debt market. where Any further delay with the IMF loan installment would seriously damage sentiment and thus increase the govenment’s already challenging debt servicing costs.

 

"The programme will fall if they don't manage to square the domestic debt equation," said Mr Ash of the IMF package. "You'd end up with the lira going through the roof and probably hyperinflation," he added.

 

Yields on the government’s benchmark lira-denominated bonds soared to 91.81 per cent from 87.95 at Thursday’s close, and judging by deal value-dated to Monday, next week’s prospects appear even worse.

 

Turkey’s domestic debt totals about 60 per cent of the country’s gross domestic product and is likely to rise to approximately 70 per cent by the end of the year, Mr Ash said.

[MosJan]

yes el asum em es mer Alpha'n chka korela du mi asa turkyai finansakan hartserna k@nnarkum , off be sirts hangstatsav , gone imatsa te ur es inch bani es .

 

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