ISTANBUL (Reuters)–Turkish markets surged on Friday after news the country will secure $10 billion in new IMF and World Bank loans that Ankara hopes will turn the page on two months of financial crisis.
The resignation of Energy Minister Cumhur Ersumer–whose ministry is beset by corruption allegations–also sent stocks soaring.
IMF managing director Horst Koehler said on Friday the Fund strongly supported Turkey’s economic program and that final details of a $10 billion package were being worked out. "This package is also based on clear commitment and action to combat corruption and make the society–the political process more transparent–to depoliticize the economy," Koehler said.
In a telephone interview with Reuters–Prime Minister Bulent Ecevit said: "Turkey will make the very best use of this assistance. The fact that Koehler has stepped in and that the IMF has taken a positive stance gives us hope."
World Bank President James Wolfensohn confirmed that the bank would participate in the package–and said an announcement would probably come this weekend after a board meeting. He praised Turkey’s reform plans as "very good." U.S. Treasury Secretary Paul O’Neill also gave his backing to the package–calling it "appropriate."
The crisis sparked by a political row in February forced a float of the Turkish lira–which lost nearly half of its value against the dollar at the peak of the crisis.
"The loan will definitely cover Turkey’s financing needs for 2001," said Oktay Sehsuvaroglu–Vice-President of Deutsche Bank Istanbul. "It is definitely a lot more than what was expected."
The IMF will provide about $8.5 billion of the loan with the balance coming from the World Bank. That would be on top of $6.25 billion still left from an earlier IMF loan and $5 billion from a previous World Bank agreement.
Turkey needs the fresh cash to help mop up the mess created by its ramshackle banking system–particularly the state banks–and to deal with its hefty domestic debt burden. The main concern now will be political stability and whether the government is strong enough to implement the far-reaching and painful reforms that will be a condition of the new loans.
Even as Economy Minister Kemal Dervis was in Washington hammering out details of the rescue package–back home Prime Minister Bulent Ecevit was wrestling with a corruption scandal at the energy ministry that has threatened his coalition. Ersumer became the first political victim of the financial crisis on Friday when he said he had submitted his resignation over the graft allegations.
Markets are hoping the resignation–which followed days of negotiations between the coalition partners–will banish dangers of friction in the coalition government. A prosecutor this week charged 15 people–including former senior energy ministry officials–in a probe of energy tenders dubbed "Operation White Energy." The prosecutor said ministerial immunity prevented him from questioning Ersumer..
Ersumer said the allegations against him were groundless. Ecevit had previously resisted pressure for political heads to roll over the crisis–fearing any changes could upset his fragile coalition.
The prime minister sought to play down fears of splits over the corruption scandal–saying the three coalition partners were working in harmony. It was a row over corruption and Ecevit’s commitment to tackling it that triggered the crisis in the first place. Turkey’s Western allies and potential foreign lenders see corruption and a lack of transparency as one of the main problems holding back the economy and blocking reform.