Turkey in crisis

12 December 2000

Turkey is the latest country to be overcome by financial crisis. At the beginning of December the country was hit by massive capital flight and interest rates soared to over 1000%. The IMF has negotiated further reforms with the government and has agreed to provide more than US$10 billion

The government announced that it would stand by its IMF-agreed anti-inflation policies and privatize the telecom industry, but this failed to quell the panic and the stock market plunged. Currency devaluation looked inevitable in early December.

World Bank President James Wolfensohn warned the government that Turkey faced a “serious threat”, and called on it to outline strong financial measures for 2001, including increasing electricity prices, speeding up the privatization of Turkish Telecom, and reforming the banking sector. The World Bank has pledged a three-year loan of $3 billion but disbursements have been held up owing to delays in bank sector reforms.

In November, thousands of public sector workers had demonstrated in the capital, Ankara, against government spending cuts imposed by the IMF. One banner read: “We want an economy that favours workers and pensioners, not big business and the IMF. This budget will create poverty, hunger and destitution for public workers,” said Siyami Erdem, head of the KESK labour group. The IMF is forcing the government to cut its budget deficit and reform social security payments to bring inflation down from 40% to single figures by 2002.