In a bizarre effort to shore up international investor confidence, the Turkish prime minister appointed Kemal Dervis, a World Bank Vice President, to become a state minister in charge of the economy in Turkey in late February. The last time an unelected person became a minister was during the 1971 coup.
Dervis’ first task was to negotiate new credit lines with the Bank and IMF, as the country’s financial crisis continued. Turkey is seeking $10-12 billion in foreign loans to tackle the crisis. The Bank and Fund are expected to demand a new anti-inflation programme, including extensive spending cuts, and a speed up of structural reforms, particularly in the banking sector. Reforming the banking system is one of the key pledges made to the IMF in return for $7.5 billion of emergency funding last November. The government floated the lira in mid March, which then lost 30 per cent of its value against the dollar, causing petrol and other price rises. Inflation is expected to increase to 25 per cent.
Reuters reported that Turkish Deputy Prime Minister Devlet Bahceli urged the IMF to “take the social dimension into account without breaching the programme’s general logic and aims”. Turkey’s main opposition party, the pro-Islamic Virtue Party, introduced a censure motion against the government, blaming it for pushing the economy into recession by implementing the IMF‘s previous programme. The motion said “the programme has adversely affected all sections of society and failed to reach its targets”.