Turkey PM vows to clear off IMF debt by April next year

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Recep Tayyip Erdogan, Turkey’s prime minister (L) speaks with Christine Lagarde, managing director of the International Monetary Fund (IMF) in Cannes, France. Photo – Zimbio.com

Turkish Prime Minister Tayyip Erdogan announced at a party congress on Sunday Ankara will clear its remaining $1.3 billion of debt to the International Monetary Fund (IMF) by next April.

Turkey has heavily relied in the past on IMF loans to meet its financial shortfalls, but has managed to do without the aid since 2008. It has been gradually reducing its debts to the fund, which stood at $1.9 billion in late May.

“We took over $23.5 billion of debt. As of now we have $1.3 billion of debt and we will cut it to zero in April. We are holding technical discussions now,” Erdogan was quoted as saying at the congress by Reuters.

Turkey’s last standby agreement with the fund was in 2005 and expired in May 2008.

According to the IMF’s country report, the Turkish financial system has weathered the 2008-09 global financial crisis relatively well. The Paris-based agency said it was due to the significant capital buffers built up following the 2000-01 banking crisis, more effective fiscal and monetary management, strengthened banking regulation and supervision, and conservative banking practices.

“In addition, Turkey’s resilience owed much to a rapid rebound in capital flows and real activity. However, new macro-financial risks have emerged in recent years from domestic and international developments. Along with some other emerging market countries, Turkey experienced a credit boom in the period to mid-2011, accommodated by easy domestic policies and global monetary conditions, that led to large capital inflows and strong domestic demand, contributing to a sharp widening in the current account deficit and increases in short-term external debt,” IMF’s report published on 7 September said.

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