ANKARA: Turkish public spending will rise by 11.8 percent in 2009, Deputy Prime Minister Nazim Ekren said yesterday, easing fiscal policy ahead of a possible new International Monetary Fund deal expected to be less stringent.
Turkey’s government, which faces key municipal elections in early 2009, is under pressure to tackle high youth unemployment rates.
Ekren, who is in charge of economic coordination, told Reuters in an interview the government had to boost investment spending to modernize the country’s infrastructure and defended the rise as “a reasonable figure”. Economists are concerned the government will opt for a less strict fiscal policy after its stand-by accord with the IMF ended in May — regarded as an anchor of steady economic policy.
An IMF mission will travel to Turkey in the early fall to conduct a post-program monitoring.
The government, which has cut a key primary surplus target since the end of the $10 billion accord, has not made a final decision whether to agree to a follow-up agreement with the IMF. But it has indicated it might seek a precautionary stand-by deal. “Together with the southeastern Anatolian project, the central administrative investment will rise to 15.5 billion lira ($12.48 billion),” Ekren said, referring to a large-scale development project including irrigation channels and construction of new dams. “Investment by local administrations will rise by 30 percent to 17.5 billion lira from 13.4 billion lira. This will bring public investments to 36.9 billion lira in 2009 from 32.9 billion lira this year, meaning a 11.8 percent rise,” he said.
Turkey will hold municipal elections next year, and economists fear the pro-business, pro-reform government may soften fiscal austerity ahead of elections.
The government would push ahead with the privatization of partly state-owned Halkbank this year if market conditions were favorable, Ekren said.
Ekren said the government should wait for the best market environment in Turkey and abroad to get the highest price for its assets before pushing for selling them off.
The government is yet to decide the sale strategy for Halkbank, he said.
“Halkbank is an important bank. The local or the foreign bank which will buy Halkbank will automatically be listed among the top five banks (in Turkey),” Ekren said. Halkbank’s 25 percent stake was listed on the Istanbul Stock Exchange in 2007 in what was Turkey’s largest ever initial public offering.