Economy Minister Ali Babacan said talks with the IMF aim at a loan agreement for 2010-12. Mr Babacan added that the government's medium-term economic programme would provide the basis for the talks and any subsequent loan agreement. The purpose of the government programme was to reduce the budget deficit by cutting social security, health care and local government spending. Finance Minister Mehmet Simsek said that the IMF would provide cheap funding. He admitted that Turkey would be running a primary budget deficit for the first time since AKP came to office. Reportedly the government would like to conclude a new agreement with the IMF by September.
The resumption of loan talks with the IMF is positive news in our opinion. However, the comments from Messrs Babacan and Simsek suggest to us a lack of urgency similar to earlier this year. The likelihood of a primary budget deficit in 2009 will probably increase pressure on the government to reach an agreement. The most important factor remains Prime Minister Recep Tayyid Erdogan and unless he agrees to IMF-imposed conditions, the probability of any loan agrement remains uncertain.