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Over the past two decades, Turkey has suffered repeated economic crises. The latest happened earlier of last year, when a devaluation of the currency had the people taking to the streets. Economic labels like budget deficit, high interest rates, price hikes, and contracting economy give mere ghostly hints of the pain the Turkish economy has suffered. Desperate for loans, the Turkish government has had consecutive stand-by agreements with the International Monetary Fund (IMF) and is currently implementing an IMF-backed reform program worth some $ 19 billion. Last year, Turkey won approval from the IMF governing board for up to $ 10 billion in new loans. Indeed, the second half of 1999 will be remembered as "a period of reforms. " In political, economic, and social terms, we have passed through many defining moments successfully.
Meanwhile, Turkey's pace of industrialization continued and several major investments were realized. The Turkish nation feels a growing self-confidence as they witness this country playing an increasingly forward role in its region, Europe, and beyond; they are very much aware of the huge potential inherent in Turkey's forthcoming future. This is one important reason why a series of important economic reforms leading to a stand-by agreement with the IMF received a wide-based support. Likewise, alongside other reform measures in the economic field, particularly the amendments to the constitution enabling foreign investors to seek international arbitration, social security, and tax reforms and the banking reform reflect this home-grown consensus about the need to modernize Turkey in every respect. It is well-understood that things have to change in this country which is now more tightly intertwined with the world than it has ever been, and that the present government spearheads the movement towards a more prosperous, stable, and secure future where Turkey is called for to fulfil a global role as it takes its place in the forefront of the twinned globalization and Eurasian processes. Within the framework of the IMF packages, Turkey is aiming to trim state bureaucracy, cut government spending, reform the financial system, private public sector enterprises, enhance transparency in economic management, improve governance in the public and private sectors and strengthen the social security net.
Yet Turkey's problems persist today, even though it was among the first countries in the region to venture on to the track of reform. Indeed, the reform Egypt began through its own stand-by agreement in the 1990 s, had been preceded by Turkey's reform program in the 1980 s. Beforehand, Turkey was a well-protected market and import substitution was the model for Turkish industrialisation. But beginning in 1980, a programme of economic reform was launched that aimed to decentralize the economy and strengthen market mechanisms.
Within that framework, laws were developed to liberalism foreign trade rules, the foreign exchange regime and activate the capital market. Turkey's deteriorating economy has provoked critics to ask whether the liberalisation which accompanied reform is in fact the culprit. But according to many people Turkey's economic crisis is due to its failure to implement the necessary institutional changes needed for a market economy. This led the economy to slow. Foreign currency expenditure grew as a result of the liberalisation of imports, while revenues in foreign currency shrank. This led to the increased indebtedness of the country.
While many believe Turkey's ills stem from globalisation and the opening of the economy, the real causes are different. Turkey's problems are because of incompetent management and not because of liberalisation. Turkey would have suffered more if it had not adopted a free market economy. " The weakness of Turkey's financial sector lies behind the current economic crisis which he described as "the worst in Turkish history. The reason why the Turkish economy is in a deep crisis is not globalisation, it is because Turkey has failed to execute many of the measures accompanying reform. Coupled with political instability, this has led to a crisis.
The structural measures which had to be implemented years ago are now being enforced, the reform of banks, social security, farming policy, and public procurement as crucial to economic improvement. Once that is done, the Turkish economy will have finally laid the necessary stones for a long-term and healthy growth strategy, while still embracing globalisation. One area where significant reform is happening in Turkey is in the financial sector. Banks are now responsible to independent and professional bodies. The changes in governance have also been complemented by three other steps: a complete financial restructuring of the system to protect depositors and creditors and permit parts of the system to return to life; ridding banks of unprofitable activities; and a toughening of supervision to ensure that past problems do not occur.
The current economic slowdown is attributable to a mix of external and internal factors. On the domestic front the "desolate" budget situation and political uncertainties have forced interest rates well above inflation. Along with the Imf's stabilization program the inflation rate went down to % 39, however in year 2001 it is expected to reach between % 50 - % 55. Additionally Turkish Lira was devaluated only % 15 all through year 2000. In the first quarter of 2001 the Turkish Lira was devaluated again by % 40 and the IMF stabilization program has been abandoned. The result of this devaluation will be a high increase in the export of goods and services from Turkey.
The majority of companies expect the economy to pick up in the second half of 2001, provided that the government is willing to implement reforms. Overall growth in 2001 is expected to be less than year 2000. Turkey has maintained its scheduled debt repayments and has had no problem in obtaining new loans on the Eurobond market. A further positive factor is the relatively large foreign currency reserves held by the Central Bank. Since the middle of the year capacity utilization within Turkish industry has edged up. On 10 th December 1999 Turkey became a candidate to join to the EU.
With the new economy program, further discussions will arise to become a member of the EU. In expectation of greater economic stability the rating agency Standard & Poor's has upgraded Turkey's long-term credit-worthiness from "stable" to "positive." This has been aided by the Turkish Central Bank's decision to abandon its established foreign exchange policies and to devalue the lira in line with inflation objectives. Turkey is also accepted in the MEDA program as an EU candidate. This program includes: - support for economic transition: prepare for the implementation of free trade through increasing come...
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Research essay sample on Standby Agreement Between Turkey And Imf
