Why AKP will not apply for an IMF stand-by just yet

[Prof. Dr. Mukerrem Hic]

Ministers responsible for the economy, in their contacts with IMF
officials and their interviews with foreign press argue that Turkey
does not need to draw a new stand-by agreement. P.M. Tayyip Erdoğan
declared to the Turkish press for domestic consumption that if IMF
squeezed Turkey's throat too tight with many conditions, foremost to
limit Turkey's growth rate down to 2%, he would not consider a stand-
by. To see the truth in this statement, all we have to do is to
realize that general municipality elections will be held in March
2009. Until then, any condition IMF would insist on, especially the
reduction of the growth rate, of government spending and the budget
deficit and restraining central government transfer of funds to
municipalities would all seem as squeezing Turkey's (really AKP's)
throat. Having lost public support, with polls showing AKP at around
34% down from 47%, CHP at around 25% up from 21%, and MHP around 15%
slightly up from 14%, AKP needs all the money to spend to attract
votes, to start new local infra-structure, to finish those already
started, to distribute goods, food, coal to the "needy" prospective
voters.

On the other hand, on a purely economic rationale Turkey should apply
to IMF immediately now because the global financial crisis and the
global recession caught Turkey in a disadvantageous macro position:
Wide balance of payments deficits, large sums of outside debt and
interest payments to be made and new credits to be sought by the
government sector (central government and municipalities), banks and
the private sector while financial funds and direct private
investments has begun to decline. The advantage with the IMF stand-by
is not only the amount of credit Turkey will receive from the IMF
which is incomparable to the total yearly payments the economic agents
in Turkey have to make, but that it would provide an "anchor" and thus
prevent a faster deterioration in foreign exchange flows, plus the
advantages of stability measures themselves that the Turkish
government will have to abide by.

But AKP government, politically motivated not to accept IMF
restraints, hopes that it can get by until the municipality elections
in March with the foreign exchange presently in the hands of the
Turkish Central Bank. And after a short time lapse from the
municipality elections, it can sit down with the IMF and come to terms
with the stand-by restraints. Next general parliamentary elections do
not have to be held until July 2012. This would allow them enough time
to implement an IMF stand-by with all restraints it will entail and
end it while reaching a comfortable economic level for voters when
parliamentary election time comes.