Turkey 

Background:

         Turkey was created in 1923 from the Turkish remnants of the Ottoman Empire. Soon thereafter the country instituted secular laws to replace traditional religious fiats. In 1945 Turkey joined the UN and in 1952 it became a member of NATO. Turkey occupied the northern portion of Cyprus in 1974 to prevent a Greek takeover of the island; relations between the two countries remain strained. Periodic military offensives against Kurdish separatists have dislocated part of the population in southeast Turkey and have drawn international condemnation. 

Geography

Location:

southeastern Europe and southwestern Asia (that portion of Turkey west of the Bosporus is geographically part of Europe), bordering the Black Sea, between Bulgaria and Georgia, and bordering the Aegean Sea and the Mediterranean Sea, between Greece and Syria 

Geographic coordinates: 39 00 N, 35 00 E 

Map references: Middle East 

Area: total:  780,580 sq km

land:  770,760 sq km

water:  9,820 sq km 

Area - comparative: slightly larger than Texas 

Land boundaries: total:  2,627 km

border countries:  Armenia 268 km, Azerbaijan 9 km, Bulgaria 240 km, Georgia 252 km, Greece 206 km, Iran 499 km, Iraq 331 km, Syria 822 km 

Coastline: 7,200 km 

Maritime claims: exclusive economic zone:  in Black Sea only: to the

maritime boundary agreed upon with the former USSR

territorial sea:  6 NM in the Aegean Sea; 12 NM in Black Sea and in Mediterranean Sea 

Climate: temperate; hot, dry summers with mild, wet winters; harsher in interior 

Terrain: mostly mountains; narrow coastal plain; high central plateau (Anatolia) 

Elevation extremes: lowest point:  Mediterranean Sea 0 m

highest point:  Mount Ararat 5,166 m 

Natural resources: antimony, coal, chromium, mercury, copper, borate, sulfur, iron ore, arable land, hydropower 

Land use: arable land:  32%

permanent crops:  4%

permanent pastures:  16%

forests and woodland:  26%

other:  22% (1993 est.) 

Irrigated land: 36,740 sq km (1993 est.) 

Natural hazards: very severe earthquakes, especially in northern Turkey, along an arc extending from the Sea of Marmara to Lake Van 

Environment - current issues: water pollution from dumping of chemicals and detergents; air pollution, particularly in urban areas; deforestation; concern for oil spills from increasing Bosporus ship traffic 

Environment - international agreements: party to:  Air Pollution, Antarctic Treaty, Biodiversity, Desertification, Endangered Species, Hazardous Wastes, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Wetlands signed, but not ratified: 

Antarctic-Environmental Protocol, Environmental Modification 

Geography - note: strategic location controlling the Turkish Straits (Bosporus, Sea of Marmara, Dardanelles) that link Black and Aegean Seas; Mount Ararat, the legendary landing place of Noah's Ark, is in the far eastern portion of the country 

Population: 66,493,970 (July 2001 est.) 

Age structure: 0-14 years:  28.42% (male 9,620,291; female 9,276,347)

15-64 years:  65.45% (male 22,116,599; female 21,401,165)

65 years and over:  6.13% (male 1,878,571; female 2,200,997) (2001 est.) 

Population growth rate: 1.24% (2001 est.) 

Birth rate: 18.31 births/1,000 population (2001 est.) 

Death rate: 5.95 deaths/1,000 population (2001 est.) 

under 15 years:  1.04 male(s)/female

15-64 years:  1.03 male(s)/female

65 years and over:  0.85 male(s)/female

total population:  1.02 male(s)/female (2001 est.) 

Infant mortality rate: 47.34 deaths/1,000 live births (2001 est.) 

Life expectancy at birth: total population:  71.24 years

male:  68.89 years

female:  73.71 years (2001 est.) 

adjective:  Turkish 

Ethnic groups: Turkish 80%, Kurdish 20% 

Religions: Muslim 99.8% (mostly Sunni), other 0.2% (Christian and Jews) 

Languages: Turkish (official), Kurdish, Arabic, Armenian, Greek 

Literacy: definition:  age 15 and over can read and write

total population:  85%

male:  94%

female:  77% (2000) 

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Economy - overview:

         Turkey's dynamic economy is a complex mix of modern industry and commerce along with traditional agriculture that still accounts for nearly 40% of employment. It has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport, and communication. The most important industry - and largest exporter - is textiles and clothing, which is almost entirely in private hands. In recent years the economic situation has been marked by erratic economic growth and serious imbalances. Real GNP growth has exceeded 6% in most years, but this strong expansion was interrupted by sharp declines in output in 1994 and 1999. Meanwhile the public sector fiscal deficit has regularly exceeded 10% of GDP - due in large part to the huge burden of interest payments, which now account for more than 40% of central government spending - while inflation has remained in the high double digit range. Perhaps because of these problems, foreign direct investment in Turkey remains low - less than $1 billion annually.

         Prospects for the future are improving, however, because the ECEVIT government since June 1999 has been implementing an IMF-backed reform program, including a tighter budget, social security reform, banking reorganization, and accelerated privatization. As a result, the fiscal situation is greatly improved and inflation has dropped below 40% - the lowest rate since 1987. The country experienced a financial crisis in late 2000, including sharp drops in the stock market and foreign exchange reserves, but is recovering rapidly, thanks to additional IMF support and the government's commitment to a specific timetable of economic reforms. 

GDP: purchasing power parity - $444 billion (2000 est.) 

GDP - real growth rate: 6% (2000 est.) 

GDP - per capita: purchasing power parity - $6,800 (2000 est.) 

GDP - composition by sector: agriculture:  15%

industry:  29%

services:  56% (1999) 

Population below poverty line: NA% 

Household income or consumption by percentage share: lowest 10%:  2.3%

highest 10%:  32.3% (1994) 

Inflation rate (consumer prices): 39% (2000 est.) 

Labor force: 23 million (2000 est.)

note:  about 1.2 million Turks work abroad (1999) 

Labor force - by occupation: agriculture 38%, services 38%, industry 24% (2000) 

Unemployment rate: 5.6% (plus underemployment of 5.6%) (2000 est.) 

Budget: revenues:  $54.5 billion

expenditures:  $75.2 billion, including capital expenditures of $3.3 billion (2000) 

Industries: textiles, food processing, autos, mining (coal, chromite, copper, boron), steel, petroleum, construction, lumber, paper 

Industrial production growth rate: 6.2% (2000 est.) 

Electricity - production: 125.3 billion kWh (2000 est.) 

Electricity - production by source: fossil fuel:  71%

hydro:  29%

nuclear:  0%

other:  0% (2000 est.) 

Electricity - consumption: 119.5 billion kWh (2000 est.) 

Electricity - exports: 350 million kWh (2000 est.) 

Electricity - imports: 3.35 billion kWh (2000 est.) 

Agriculture - products: tobacco, cotton, grain, olives, sugar beets, pulse, citrus; livestock 

Exports: $26.9 billion (f.o.b., 2000 est.) 

Exports - commodities: apparel 25.6%, foodstuffs 15.4%, textiles 12.3%, metal manufactures 8.6%, transport equipment 8.1% (1998) 

Exports - partners: Germany 18.7%, US 11.4%, UK 7.4%, Italy 6.3%, France 6.0% (2000 est.) 

Imports: $55.7 billion (c.i.f., 2000 est.) 

Imports - commodities: machinery 28.3%, chemicals 15.2%, semi-finished goods 14.5%, fuels 11%, transport equipment 9.5% (1999) 

Imports - partners: Germany 13.1%, Italy 7.9%, US 7.2%, Russia 7.0%, France 6.6%, UK 5.0% (2000 est.) 

Debt - external: $109 billion (2000 est.) 

Economic aid - recipient: ODA, $195 million (1993) 

Currency: Turkish lira (TRL) 

Currency code: TRL 

Exchange rates: Turkish liras per US dollar - 677,621 (December 2000), 625,219 (2000), 418,783 (1999), 260,724 (1998), 151,865 (1997), 81,405 (1996) 

Fiscal year: calendar year 

Economy

Gross Domestic Product (GDP): US$312.4 billion in 1993 (US$5,000 per capita). Economy gradually being liberalized and industrialized; real growth averaged 7.3 percent in 1993.

Agriculture: Less than 15 percent of GDP in 1993 but remains crucial sector of the economy, providing more than 50 percent of employment, most raw materials for industry, and 15 percent of exports. Wheat and barley main crops; cotton, sugar beets, hazelnuts, and tobacco major cash crops. Livestock production extensive and growing. Valuable forest areas poorly managed; fisheries underdeveloped.

Industry: Major growth sector contributing more than 30 percent of GDP in 1993, employing 33 percent of labor force. Food processing and textiles major industries; basic metals, chemicals, and petrochemicals well established.

Imports: US$29.4 billion in 1993. Main imports included machinery and equipment, 60 percent; petroleum, 8.5 percent; and foodstuffs, 4 percent.

Exports: US$15.3 billion in 1993, consisting of manufactured goods (mainly textiles and processed leather products), 70 percent; foodstuffs, 20 percent; mineral products, 4 percent.

Major Trading Partners: Industrialized countries, especially members of European Union, United States, Russia, and Saudi Arabia.

Balance of Payments: In 1993-94 Turkey experienced its fourth major balance of payments crisis in last forty years. Domestic fiscal policy and International Monetary Fund (IMF) helped reduce imports in 1994. Trade deficit was US$4.8 billion in 1994. Soaring imports during first seven months of 1995 pushed trade deficit up to US$6 billion.

General Economic Conditions: In 1995 economy grew during first nine months; inflation became more severe. December 1995 elections important for fiscal stability.

Currency and Exchange Rate: 1 Turkish lira (TL) = 100 kurus; (August 31, 1995) US$1.00 = TL47,963.00.

ECONOMIC OVERVIEW

Economy Minister: Kemal Dervis

Currency: Turkish lira (TL)

Market Exchange Rate (7/17/01): US$1=1,500,000 TL (compared to US1$=640,260 TL on 8/3/00)

Gross Domestic Product (GDP) (2000E, market exchange rates): $200.5 billion

Real GDP Growth Rate (1991-2000 annual average): 3.7% (2000E): 7.1% (2001E): -5.0%

Consumer Price Inflation Rate (2000E): 55% (2001E): 60.4%

Current Account Balance (2000E): -$9.8 billion (2001E): $3.6 billion

Major Trading Partners: Germany, United States, Italy, France, United Kingdom, Russia

Merchandise Exports (2000E): $31.2 billion (around half going to the EU)

Merchandise Imports (January-May 2000E): $20.3 billion

Merchandise Trade Balance (January-May 2000E): -$7.8 billion

Major Export Products: Agricultural, textiles, iron, steel

Major Import Products: Oil, machinery, chemicals, iron, steel

Foreign Currency Reserves (non-gold; 7/00): $23.2 billion

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Source: Financial Times; Winning Turkey's trust; Kemal Dervis fears his reforms could be derailed by vested interests; May 14th, 2001 -

Mr Dervis is optimistic that there will be a strong recovery. Apart from the competitive exchange rate resulting from the devaluation, other forces in favour of arecovery include the flexibility of Turkey's labour force and private sector companies. "If interest rates decline rapidly after foreign financing kicks in, which is what we hope will happen, a lot of blockages in the real sector can be resolved," says Mr Dervis.

Source: The Wall Street Journal; Turkey's crisis has a silver lining; Mar 2nd, 2001

One of the generals looked suspiciously at the foreign ministry man dealing with Turkey's European desk. The currency was being altered, to match European norms. Would this mean, asked the general, that the face of the great Kemal Ataturk, founder of the state, would vanish from the Turkish lira? It would be an insult. No, said the official: The greatest possible insult to the great man was to have his face presiding over a note that read "10 million."

True enough. In a country that produces notes worth even 100,000 you would usually expect blood on the streets because of the terrible instability that inflation brings. So Turkey, with help from the International Monetary Fund, had been trying to do something about it.

Source: Financial Times ; 'Good news' soon for Turkey; Apr 5th, 2001

Kemal Dervis, Turkey's new economy minister, hopes next week to announce "good news" in resolving the country's financial crisis after facing his first real criticism at home. As thousands of small businessmen demonstrated against the government in Ankara, the capital, and in the cities of Izmir and Konya, Mr Dervis on Thursday promised a meeting of bankers in Istanbul measures that, according to at least one senior participant, would "comfort" rattled Turkish financial markets.

Fuelled by banks' purchases of dollars, the Turkish lira has fallen sharply this week to lose 44 per cent of its value against the dollar since the currency was floated on February 22.

Although Mr Dervis has not specified the reasons for his optimism, he may be able to finalise a reform programme with the International Monetary Fund.

A western diplomat said that the government's recent progress in pushing through some of the 15 emergency economic reform laws that had been sought by Mr Dervis should create a more "receptive atmosphere for discussing additional funding within and outside the IMF".

However, Mr Dervis has been facing increasing criticism from government leaders and from previously euphoric media commentators, since he returned empty-handed from an abortive fundraising mission to Washington, Berlin, and Paris last week.

The devaluation and a disastrous surge in interest rates, triggered by a row between the president and prime minister, have plunged Turkey into a fierce economic crisis.

The Labour Platform, an alliance of unions that plans a big demonstration in Istanbul on April 14, says the crisis has already cost 300,000 jobs.

Source: Financial Times; US to support Turkey's reforms; Apr 18th, 2001

George W. Bush, the US president, on Wednesday telephoned Bulent Ecevit, Turkish prime minister, to offer support to efforts by Turkey's much-criticised government to overcome a deepening financial crisis. Mr Bush contacted the Turkish leader to back a "close friend and ally" as the Group of Seven deputy finance ministers discussed Turkey's request for $10bn-$12bn in external assistance to support its economic rescue package.

Although the US leader stopped short of pledging new money, western officials said discussions were underway between the International Monetary Fund (IMF), the G7 and Turkish officials on how and when to help Ankara.

Source: Financial Times; The IMF's blunder in Turkey - Analysis by Ercan Kumcu

The fund wrecked a comprehensive anti-inflation plan because it failed to understand market conditions, says Ercan Kumcu. At the end of 1999, the International Monetary Fund designed a comprehensive and popular anti-inflation programme for the Turkish economy. It now lies in ruins, thanks mainly to the Fund's panicky reactions to unusual market circumstances. The IMF essentially confused events in Turkey with those in south-east Asia or Latin America.

In November, rising interest rates caused by a seasonal demand for foreign exchange by Turkish banks was misconstrued as an attack on the Turkish lira, reminiscent of the outflow of short-term capital that caused Asia's financial crisis in 1997. In fact, Turkey's problem had a different root. Initially, the central bank did not react to the rising interest rates. Instead, it adhered to a strict monetary policy rule of keeping net domestic assets - money supply - within a narrow band. This was part of the IMF agreement.

Source: Morgan Stanley D.W.; Devaluation brings stagflation; Mar 9th, 2001

After an impressive recovery last year, the Turkish economy faces a poor outlook this year. The ongoing currency crisis and serious troubles in the banking sector have led us to cut our real GDP growth forecast from 2.8% to –3.5% in 2001. Even though exporting sectors are likely to benefit from the lira’s flotation, the exchange rate devaluation will dampen domestic demand. The contribution of net international trade to national income will increase, on our forecasts, from –3.8% in 2000 to 8.7% this year, as exports rise 12.0% and imports decline 13.2% in real terms. In addition, export-oriented industries and services sectors — especially the tourism industry — will become the pillars of growth this year, in our view.

With the start of the now-defunct IMF-prescribed stabilisation programme in 2000, interest rates dropped beyond market expectations, generating a wealth effect that boosted private consumption. However, we expect this year’s underlying theme to be the negative wealth effect of the exchange rate devaluation and excessively high interest rates, which reduce the propensity to consume and undertake fixed investment. In addition, the problems in the banking system are likely to have adverse effects on the credit channel. Credit growth in 2000 was one the leading engines of the staggering rise in domestic demand, as consumer loans rose 279% in dollar terms. As a result, we tentatively project private consumption and gross fixed investment to contract by 4.3% and 12.4% in real terms this year.

Source: The New York Times; Turkey's strategic importance is too great to allow the White House to trust the International Monetary Fund and other international bodies with the cleanup operation; Feb 27th, 2001

Late last week in Turkey, the stock market declined by 18 percent and the lira lost a third of its value. Interest rates have soared to several thousand percent, and inflation is around 30 percent. What reportedly scared away investors was a publicized argument between President Ahmet Necdet Sezer and Prime Minister Bulent Ecevit, whom the president had accused of being too lenient toward corrupt politicians. But that was merely the beginning of the crisis, not its underlying cause. The cause was the very fragility of Turkey's recent economic reforms and the boomlet they had created, sending market indexes up from 5,000 to nearly 20,000 points in 1999 and early 2000. Turkey is building modern democratic and financial institutions that provide stability, but building such institutions can be destabilizing in its own right. Turkey's problems are those of success, but that does not make its problems any less dangerous to American interests.

Turkey, along with Brazil, perhaps, is now the world's foremost example of a state whose institutions are struggling to keep up with modernization. The government bureaucracy remains mired in Ottoman lethargy. Some banks, burdened by foreign-currency debts and murky dealings, are close to collapse. Tax revenues are insufficiently distributed to the provinces where they are needed.

Meanwhile, the dramatic liberalization of the Turkish economy begun in 1983 by Turgut Ozal, the late prime minister, has created a vast new population of urban middle-class Turks, who are pressing for better public services.

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IMF Concludes 2002 Article

On April 15, 2002, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Turkey.

Background

Turkey is in the midst of a determined campaign to turn around decades of weak performance. Not only has growth been on a downward trend since the 1970s (and inflation on an upward one), it has also become increasingly volatile. This performance reflects pervasive structural rigidities, weak public finances, and low policy credibility. Despite many achievements since the economic liberalization of the 1980s, deep-rooted structural problems remain a drag on growth, and past disinflation attempts have had little success.

The past couple of years have witnessed three major attempts at addressing underlying weaknesses. The first was during 2000 under the three-year Standby Agreement initiated in December 1999. The program instituted strong fiscal adjustment and a preannounced exchange rate crawl to restore debt sustainability and to break entrenched inflation expectations. The program also included a wide-ranging structural reform agenda—especially in banking, social security, privatization, and agriculture—to set Turkey on a higher sustainable growth path. Despite some notable achievements in structural reforms, in turning around the public sector primary balance, and in reining in inflation, a worsening current account and a fragile banking system led in late 2000 to a liquidity crisis which turned into a full-blown crisis, with a large loss of reserves. Prompted by political tensions, this was followed by another speculative attack in February 2001, forcing the government to float the currency amidst high interest rates and a renewed acceleration in inflation.

The second phase was the adoption in May 2001 of a strengthened program aimed at restoring investor confidence by addressing the roots of the crises, with the help of additional IMF support. The authorities' revised program featured a fundamental restructuring of the banking sector (a key source of vulnerability in the past), a commitment to a floating exchange rate (reducing vulnerability to shocks), continued disinflation, substantial fiscal adjustment to underpin debt sustainability, and an enhanced role for the private sector. Just as the revised program was beginning to show results, the events of September 11 triggered a deterioration in market sentiment and a re-emergence of serious financing problems. Meanwhile, Turkey continued to suffer from an inefficient public sector, barriers to private sector development, a banking sector damaged by the earlier crises, and a high public debt burden, fuelled in part by publicly-funded bank recapitalization.

In response to September 11, the Turkish government initiated a new intensified IMF-supported program, both to protect the economy against future crises, and to continue Turkey's ambitious reform agenda. Under the 2002-04 program, the continuation of the float will limit the potential for speculative attacks. Ongoing financial sector reform together with corporate sector restructuring will help strengthen the banking and business sectors, and continued fiscal discipline should foster medium-term debt sustainability. The program's strong structural reform agenda should, once macroeconomic stabilization is achieved, finally set the stage for sustained economic growth.

Developments under the new program have been promising. Financial market conditions have improved markedly from their post-September 11 lows; the benchmark bill rate has fallen sharply, and the Turkish lira has appreciated by more than 20 percent to around TL 1.3 million to the U.S. dollar. Against this background, the trend toward dollarization has diminished, and even shown signs of reversal in recent months, the stock market has risen by over 50 percent in lira terms since mid-September, and the roll-off of external interbank credits has ceased. Short-term concerns about the public debt rollover have also largely abated, allowing a lengthening of maturity of domestic debt and strong demand for new Eurobond issues. Inflation has started to decline, helping to reduce inflation expectations and allowing the Central Bank of Turkey (CBT) to reduce the overnight rate by 14 points (to 66 percent) in three steps over the past two months.

A large number of policy measures have been taken under the new program. In January, the authorities met more than ten prior actions in the fiscal and structural areas needed for the approval of the SBA. Subsequently, all quantitative performance criteria relevant for the first review were met. Base money came in below the end-February ceiling, while Net International Reserves and Net Domestic Assets targets were met comfortably. The public sector primary surplus target of 5.5 percent of GNP for 2001 was exceeded by an estimated 0.4 percent of GNP, and in January the consolidated government sector exceeded its primary surplus target comfortably. Solid progress has also been made in meeting the program's structural conditionality.

Executive Board Assessment

Executive Directors welcomed the Turkish authorities' decisive efforts to address the problems of the past and implement an ambitious economic reform program to lay the basis for sustainable growth. In the past, financial indiscipline and structural weaknesses had prevented Turkey from realizing its economic potential, and had created an environment of highly volatile growth and inflation spanning several decades. These problems had their roots in fiscal laxity, deficiencies in governance, lack of a nominal anchor, and inefficiencies and nontransparencies in the public sector, and were evident in barriers to private sector development and a banking sector damaged by the two recent crises. Directors welcomed the Turkish authorities' progress in addressing these weaknesses and reduce the vulnerability of the economy to shocks through their bold three-year program. They noted that the program represents a further decisive step away from the interventionist policies of the past, and that it would lay the groundwork for a stronger performance in the future.

In this regard, Directors commended the authorities for maintaining the positive momentum of macroeconomic adjustment and structural reform established in response to the events of September 11. Macroeconomic policies have remained prudent; and the government has continued to press ahead with structural reform, notably with respect to the identification of public sector staffing redundancies and the adoption of the legislative basis for improved public debt management. The authorities' efforts have been rewarded by a substantial decline in interest rates, a strong balance of payments position with an associated appreciation of the Turkish lira, and a drop in inflation and in inflation expectations.

Directors noted that, while these positive results should help lay the basis for sustainable growth, there are downside risks. In particular, they emphasized that the strength and timing of the recovery in output are uncertain, and that financial markets have remained alert to the possibility of further shocks. Directors expressed concern that prolonged slow economic growth would have an adverse impact on Turkey's debt sustainability. To boost growth, they emphasized the importance of structural reforms to raise private investment and productivity and to lower real interest rates. Directors stressed that successful program implementation in the months ahead will require the undivided support of the government coalition.

Directors stressed that, although fiscal developments remain on track, strict budget implementation must continue in order to ensure a sustainable debt position. While commending the authorities' commitment to the target of a public sector primary surplus of 6.5 percent of GNP in 2002, they stressed the need to remain mindful of possible downside risks, and urged the authorities to stand ready to take further offsetting measures to safeguard the primary surplus target and maintain external debt sustainability.

Directors noted that, to be sustainable, the achievement of the overall budget targets will need to be underpinned by decisive reforms. They were encouraged by the government's efforts to improve expenditure management, streamline tax policy, and strengthen revenue administration. On the tax side, they stressed the importance of simplifying the tax code. On the expenditure side, they noted the importance of moving expeditiously with the much-needed downsizing of the state economic enterprises and civil service reform.

Directors noted the increasing scope for monetary policy to promote disinflation and enhance confidence. In this regard, Directors were encouraged by the recent decline in current and expected inflation. The introduction of inflation targeting will further anchor inflation expectations. While a number of Directors noted that, with strong efforts by the CBT and the government, the preconditions for introducing formal inflation targeting could be in place by midyear, some other Directors considered that a longer track record on disinflation would be needed for such a framework to be credible. Regarding reserve management, they urged the CBT to continue to make use of the better-than-expected balance of payments developments to build up foreign exchange reserves, which should further improve confidence, and welcomed the authorities' recent move to pre-announced foreign exchange purchase auctions. They urged further development of the money and foreign exchange markets to help ensure a smoother functioning of the floating exchange rate regime, and welcomed the authorities' plans to lower distortionary taxes and reform the system of reserve requirements. They also stressed the need to closely monitor Turkey's external competitiveness in light of the recent appreciation of the Turkish lira.

Directors welcomed the progress in banking sector reform, including the implementation of the bank recapitalization plan, but called for further rapid movement on corporate debt restructuring. Moving forward, Directors stressed the importance of preserving the integrity and transparency of the bank recapitalization process, and of sticking to its announced timetable. They also underlined the need to maintain the independence of Turkey's regulatory institutions. Directors urged the authorities to accelerate privatization now that market conditions are more favorable, noting that inefficiencies in state economic enterprises are a core factor behind Turkey's disappointing growth performance in the last decade. Similarly, Directors urged the government to be forceful in demonstrating its commitment to dealing with deficiencies in the investment environment and promoting transparency and efficiency of public administration both at the central and local levels. Directors welcomed the measures taken to combat money laundering and the financing of terrorism.

Directors commended recent moves to improve transparency and data provision. Although some deficiencies remain in fiscal statistics, they welcomed the recent extensive improvements in fiscal transparency.

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