Two separate statements released early Wednesday by the Turkish Treasury and the International Monetary Fund (IMF) announcing a suspension in talks over a stand-by deal until May have raised doubts that the long-expected agreement will actually be realized.

Observers argued that a stand-by deal with the fund is no longer on the table, as Turkey already proved that it can stand on its own two feet without foreign support during the 2009 global credit crunch. Some Turkish businessmen, particularly the Turkish Businessmen and Industrialists' Association (TÜSİAD), had long pressured the government to forge a deal with the IMF as an anchor of confidence and a source of low-cost loans to nonfinancial sectors.Turkey and the IMF had been discussing a possible stand-by deal since May 2008, when a previous agreement, a three-year $10 billion loan, expired. The stand-by issue has long remained deadlocked since the government and the IMF have differing opinions on basic matters such as the economic growth rate for 2010, the fiscal policies of the government and the amount of money to be allocated to local administrations.Under an anticipated two-year or 18-month stand-by deal with the IMF, Turkey would be provided with more than $20 billion in loans. The IMF wanted Turkey to make the Revenues Administration (GİB) autonomous, investigate the sources of taxpayers' income and cut the amount of money allocated to local administrations. The government, however, dug its heels in, underlining the importance of a program that supports fiscal discipline and the targets set in its Middle Term Economic Program.The fund had earlier welcomed Turkey's new mid-term economic program, a package that signaled the government's inclination to implement reforms without the input of an IMF stand-by agreement.Turkey's debt to the IMF will be completely paid off in 2013 unless a new stand-by deal is signed. Turkey owes nearly $8 billion to the fund. The IMF and Turkey have signed 19 stand-by deals so far. Turkey made its first stand-by deal with the IMF in 1961, which lasted for one year. With the stand-by deals signed to date, Turkey has obtained a total of more than $50 billion in loans from the IMF.The Treasury said in its written statement on Wednesday that a delegation from the IMF was invited to Turkey on April 24-25 to have talks following the IMF-World Bank spring meetings. The statement said that these talks were part of a routine consultation mechanism required by all member countries every year. The statement said the parties would discuss financial and monetary policies, examine foreign balance and public debt developments and assess the impact of policies on growth and balance of payments during the negotiations. Turkey's last review of this sort was in May 2007. The consultation process will reveal the Turkish economy's outlook and enable the parties to assess the framework of future relations.The Treasury announcement came on the heels of an IMF declaration, which said the IMF had agreed with Turkish officials to conduct an annual review of the Turkish economy. “The recovery underway in the global economy and in global financial markets -- together with the economic policies being implemented by the Turkish authorities in the context of their Middle Term Economic Program -- have strengthened Turkey's economic outlook,” Caroline Atkinson, director of external relations at the IMF, said in the statement on Wednesday.The IMF statement also recalled that such consultations are conducted regularly with all IMF member countries and typically are scheduled on an annual cycle. This is considered to be a routine visit by the IMF mission now that the stand-by deal talks are believed to have come to an end.According to analysts, the upcoming talks in May would mean nothing more than an exchange of views on the outlook of the economy, and talks on a possible stand-by loan deal are no longer expected to take place.End of a long-winded story?Evaluating the developments in İstanbul yesterday, Prime Minister Recep Tayyip Erdoğan said the IMF statement proves that Turkey is no longer in need of a stand-by deal.Also speaking yesterday in İstanbul, Economy Minister Ali Babacan said the government would make their final decision following the meetings with the IMF mission in May. “We will decide on how to continue relations with the IMF after having assessed the developments in the markets in May.” Asked whether the stand-by deal is no longer an option for Turkey following the IMF's declaration, Babacan said there is currently no attempt from either side to continue talks on a stand-by deal and that the issue could become more clear after the talks in May. “The Treasury statement provides the necessary details on how the process would operate. We will keep a possible stand-by deal off the agenda until May,” he stated.Babacan dismissed concerns that the country's economy needed a deal with the IMF's money to dig its way out of the global recession. “We do not have any necessity to sign a deal with the IMF. Turkey's economy has proven that it can hold up strongly through our own policies in such a dire time,” Babacan told reporters. “With or without the IMF, we will continue to implement our own program as we have done in the last six months,” he added.No extraordinary reaction expected in marketsEvaluating the possible results of the IMF decision, Ersagun Şimşek of Tera Brokers said Turkey will no longer be able to use “the IMF weapon” as insurance in case things go sour and thus will be more vulnerable to “event risk.” “Secondly, we will not be witnessing sudden sharp upward moves in the markets on vague IMF news. Thirdly, the fiscal policies are now more important than ever since the medium term economic program is the only anchor Turkey now has. Mentioning a recent survey, Şimşek recalled that half of the investors in Turkey had already lost faith in a stand-by deal. “Yet the other half should bring some pressure on the market. However right now, risk appetite is high and so far the global economy is on a recovering trend. Therefore the impact should not last long.”On hearing the news, the İstanbul Stock Exchange (İMKB) İMKB-100 index opened the day with a 649 point loss at 52,310, or a 1.2 percent loss, yesterday before settling at 52,642 at the end of the first session of trading -- a 0.6 percent loss. The index was at 52,526 at 13:05 GMT, or a 0.8 percent loss. The dollar was trading at TL 1.542 at 13:05 GMT, up slightly from TL 1.5399 on Tuesday.İbrahim Öztürk said the latest indices support the argument that Turkey does not need urgent IMF cash. Öztürk told Today's Zaman that the markets would not be affected much by the suspension of stand-by talks, although there could be ups and downs shaped by the aftereffects of this decision in the long run. “We could see a slight increase in interest rates and the lira could lose value against foreign currencies. However these are all minor changes and we do not expect an extraordinary reaction in the markets.”International Investors Association (YASED) Chairwoman Piraye Antika told Today's Zaman that not signing a stand-by deal with the IMF would not bring extraordinary changes to the markets in the short run, adding that Turkey would see disadvantages particularly in terms of foreign investments in the long run.Turkish economy proves adequacy, IMF deal not a mustCommenting on the issue, Turkish Union of Chambers and Commodity Exchanges (TOBB) Chairman Rifat Hisarcıklıoğlu said Wednesday in İstanbul there was no problem with Turkey continuing on its way without a stand-by deal. “We have already introduced our own road map for the economy. Turkey has left the worst of the crisis without the help of the IMF. … I do not believe that such a deal is a must for Turkey.” Addressing fears over a fresh cash draught in the domestic market, Hisarcıklıoğlu said Turkey has the potential to attract money inflow once the markets pick up again.A statement welcoming the suspension of talks came from the Turkish Exporters Assembly (TİM) on Wednesday. TİM President Mehmet Büyükekşi said in a written statement that they were glad to see that the government is no longer considering signing a stand-by deal with the IMF. Büyükekşi emphasized that signing a stand-by deal with the IMF in an atmosphere where Turkey has strengthened its hand with a realistic middle term economy strategy plan while international rating agencies have upgraded the country's rating would have negative repercussions and create uncertainty in global markets over whether Turkey is in serious financial trouble. Turkish exporters have long cited concerns that that the Turkish lira will gain value against other currencies following a fresh cash inflow from the IMF and that Turkey could experience a contraction in exports as companies refrain from producing and instead opt to import products.In separate comments on the issue, İş Bankası General Manager Ersin Özince said Wednesday in İstanbul that Turkey will not lose anything by not signing a stand-by deal with IMF. “I believe that certain measures that were taken by the government earlier have proved successful in keeping problems at bay,” he opined, adding that international credit rating agencies could be expected to upgrade Turkey's credit rating now that the country has become self-sufficient.  11 March 2010, ThursdayERCAN BAYSAL  ANKARA