A Brief History Of Imf Programs In Turkey And The Reasons Behind Their Ineffectiveness With The Analysis Of 2001 Financial Crisis As An Example

1705 words - 7 pages

A Brief History of IMF programs in Turkey and The Reasons Behind Their Ineffectiveness with The Analysis of 2001 Financial Crisis as
an Example Turkey first joined to IMF in 1947. It was shortly after in 1948 that Turkey's adventure with IMF started when for the first time, Turkey applied for a financial assistance to alleviate the consequences of 1948 economic crisis.1 Thereafter, Turkish governments chose to look for help from their friend, IMF, whenever in an economic peril. In the past more than 60 years, Turkey signed 19 stand-­‐by-­‐agreements with IMF with a total worth of $50 billion. Turkey has paid out all of his standing debt to IMF in May 2013 and thus ending its debtor role in the relationship.2 Turkey had been one of most troublesome clients of the IMF. Right after its first borrowing, Turkey quickly requested another loan in 1953 and became one of the first three countries to use the IMF waiver that allows the Fund to permit a member to draw more than the allowed amount that it can draw within a twelve-­‐month period.3 In 1955, Turkey became the only member country exceeding its quota. After exceeding its limits, Turkey agreed on its first standby agreement, instead of gold tranche, in 1961. This change in the loan types started a new era because for standby agreements, IMF request that the member intends to implement a sound program aimed at establishing or maintaining a realistic exchange rate. This IMF obligation put pressure on Turkey's officials to follow closely the provisions of the agreements. This situation, on the other hand, was seen by the public as a loss of Turkish economic and political autonomy and deteriorated IMF's image significantly in the following years. Until the beginning of the millennium, Turkey made numerous standby agreements with IMF and IMF's board almost had the same aims in each agreement: macroeconomic stability, fiscal adjustment, structural reforms, and monetary and exchange rate policy consistent with inflation. As of 2002, Turkey, as the spoiled child of the IMF, was 1,647 percent over its quota.4 Question to ask is then how effective were the IMF's stabilization programs in Turkey. In her general evaluation of the IMF program, Ms. Evrensel shows that in the general pre-­‐program periods, the fundamentals of the Turkish economy are quite bad. The country deals with high inflation, large budget deficits, small reserves and low capital investment. As soon as stabilization programs are in effect, the fundamentals show signs of improvement such as stable inflation rate. However almost always, the real growth rate and domestic credit rates do not show any significant improvements and they even display undesirable outcomes. In the 1 Evrensel, Ayse Y. "IMF programs and financial liberalization in Turkey."Emerging Markets Finance and Trade 40, no. 4 (2004): p6. 2 "Turkey's IMF journey as debtor ends, says minister",...

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