IMF Chief Says Turkey Doesn't Need IMF Assistance

The head of the International Monetary Fund, Dominique Strauss-Kahn has been quoted by Turkish newspapers as saying that there was no current need for Turkey to agree a new loan package from the IMF.

The two are currently in negotiations to agree terms for an IMF credit-line to Turkey. The talks have been ongoing since May when the last accord ended, and the markets (and us analysts) have been on tenterhooks waiting to see if a new deal would be reached.

The IMF, as always is attempting to impose its will on Turkey; in return for an agreement it would expect Turkey to do things like cut fiscal spending and other measures. Turkey is not keen to take these steps, especially when it has looked less and less like Turkey would ever need the IMF waiting in the wings.

It has got less likely for instance, when a bumper month for tourism led to Turkey finding a massive surplus in its current account in July. Less likely when Turkey's major banks revealed their figures for the last financial year, and showed massive profits and very healthy balance sheets.

There have been many statements from analysts and from members of the Turkish government and bodies to say that Turkey should not capitulate to IMF terms for a loan package it would not need. Now even the IMF chief has said that Turkey's economy is healthy enough to withstand the credit crunch intact. His exact words were:

"Turkey is a developing economy at the moment but soon it will be a rapidly developed and strong economy. There are no indications that Turkey's economy needs help for now. If in the future Turkey needs IMF help we will be happy to provide that," Strauss-Kahn told Turkish newspapers in Washington on Saturday.

The statements came just days after Turkey revealed a new set of budgetary and economic growth targets. The three-year plan revised the contraction for this year from 3.6% to 6%, and said that economic growth would return in 2010, accelerate in 2011 and that a downward trend on inflation would be maintained.

Those with a vested interest in Turkey are supportive of the government's stance, but would be happy to see a standby-deal reached.

"We have complete faith in the Turkish government and in the economy. We know that Turkey can come through the downturn and emerge with strong growth on the other side with or without IMF assistance, but we can see how a stand-by agreement would increase investor confidence in Turkey. We just hope this can be agreed without the government having to bend too far," said Julian Walker of Turkish property agent Spot Blue.

Spot Blue is one of the UK's largest Turkish property agents. They are currently marketing Turkish property for sale priced from £25,000. The firm also offers deals on Turkish holidays.