US embassy cable - 03ANKARA2133

UNCLAS ANKARA 002133 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, P, EUR/SE AND EB 
TREASURY FOR U/S TAYLOR AND OASIA - MILLS 
NSC FOR QUANRUD AND BRYZA 
 
 
E.O. 12958: N/A 
TAGS: ECON, PREL, TU 
SUBJECT: TURKISH ECONOMY APRIL 1:  MARKETS AWAIT IMF GOOD 
NEWS EXPECTED THIS WEEK 
 
 
REF: ANKARA 2094 
 
 
Sensitive but unclassified, and not for internet 
distribution. 
 
 
Markets Quiet; Awaiting IMF Good News 
------------------------------------- 
 
 
1. (U)  Transactions volumes in Turkish financial markets 
were very low  on April 1 am.  T-bill yields were unchanged 
at 65 percent compounded, the lira appreciated slightly to TL 
1,702,000, and the Istanbul Stock Exchange 100 index was up 1 
percent.   Stock market transaction volume has averaged at 
about $100 million per day over the past week (normal average 
daily volume is nearly $500 million).  Traders told us 
markets are awaiting news on the IMF Fourth Review.  There is 
also some  expectation in the local markets of a U.S. loan 
package of $8.5 billion, with the first tranche coming in the 
May/June time-frame, though TV news analysts are reporting on 
April 1 am of concerns in Congress that may reduce this 
package for Turkey. 
 
 
IMF and World Bank Updates 
-------------------------- 
 
 
2.  (SBU) IMF resrep told us Deputy Managing Director Krueger 
received the LOI for review on the evening of March 31.  The 
Turks had resolved the few remaining issues: they closed the 
investigation into BRSA's intervention of Pamukbank; they 
agreed to enhanced quarterly monitoring of the state banks by 
BRSA bank auditors (this became necessary after the GOT 
replaced the state bank board, reftel).  Resrep said there 
were no other significant changes to the final LOI.  If IMF 
senior management approve the LOI April 1, then the Turks 
would plan to sign it April 2.  MinState Babacan is planning 
a press conference to announce the signing, and would also 
announce the revised schedule for eliminating redundant job 
in the state enterprises (a 4th Review prior action).  IMF 
staff also expect Babacan to press the Fund to announce a 4th 
Review board date this week. 
 
 
3.  (SBU) Asked about Deputy PM Sener's press comments this 
week promising a rescheduling of Ziraat Bank loans to 
farmers, IMF resrep said he saw those comments and they were 
nothing new.  This is a long-term project of the AKP.  If the 
loans were rescheduled on commercial terms, that was okay; if 
AKP plans a wholesale rescheduling of a class of loans, that 
would contradict an LOI undertaking, and the IMF would 
object. 
 
 
4.  (SBU) World Bank economist Parks told us April 1 that the 
Bank had extended its pending adjustment loans to Turkey that 
were due to expire March 31.  The revised 2003 disbursement 
schedule over 2003 is:  $550 million in June; $825 million in 
December.  (Comment:  One of the structural conditions for 
the World Bank's June disbursement is privatization of 
state-owned Vakifbank.  The World Bank has agreed to accept 
Vakifbank's sale to its employees' pension fund as meeting 
this condition.) 
 
 
GOT Proposes Voluntary "Sacrifice" Fund To Help Pay Debt 
--------------------------------------------- ----------- 
 
 
5. (SBU) Following the March 31 Cabinet meeting, GOT 
spokesman Cicek announced that work was underway to create an 
"Economic Sacrifice Fund," chaired by MinState Babacan, who 
would publicize his efforts within one week.  The Fund would 
allow Turkish citizens and corporations to donate money to 
help the Government meet debt payments.  Last week PM Erdogan 
told the press of a similar effort, in which each citizen 
would be asked to voluntarily contribute $100 to help the GOT 
meet debt payments.  The April 1 Radikal newspaper (low 
circulation, aimed at intelligentsia) ridiculed what it 
called "dream-like" solutions to Turkey's debt problems. 
Bender Securities stock market analyst Golkan was more 
direct, calling this project "horse-s." 
PEARSON