Turkey Slashes Spending, Imposes New Taxes

by Lorys Charalambous, Tax-News.com, Cyprus

19 November 2001

After Turkey announced spending reductions and new taxes in a bid to tackle its growing economic crisis, the deputy head of the International Monetary Fund said on Sunday that the global lender was likely to send a mission to Turkey in early December, the first step in providing more money for the country.

"There is general support for sending a mission to Turkey which would probably go early in December and ... look at Turkey's financing needs," IMF First Deputy Managing Director Anne Krueger told a news conference at the end of a meeting of the World Bank's Development Committee.

The Government, a three-party coalition, said it would:

• eliminate a middle layer of bureaucracy for rural services, highways and waterworks;
• force the retirement of public-sector workers who have reached retirement age, freeze employment in state economic enterprises, and reduce planned state wage increases;
• impose a new real estate tax, a higher petrol consumption tax and a new vehicle tax
• charge ministers and officials market rents for their state-owned lodgings, and deliver all other government services at market rates.

The IMF's managing director, Horst Koehler, said late Thursday he would recommend $10 billion in loans to Turkey under a new standby financing, making Ankara the fund's biggest borrower. He said Ankara had already performed "strongly" in implementing a program of reform to handle its worst recession in years. The Fund has bailed out Turkey twice in the past 12 months, increasing its loan program to $19 billion as a banking crisis roiled the economy in February. The country floated its currency, the lira, which soon lost half its value.

"We will clench our teeth for a few months," said Bulent Ecevit, the prime minister, "We will have a tough time for a short while. God willing, after that we will emerge into the calm."

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