Turkey hopes for $10 billion rescue

ANKARA, Turkey -- Turkey is set to secure an additional $10 billion rescue package to shore up its economy in return for a finance shake-up.

The offer has taken Turkey's Economic Minister Kemal Dervis weeks to negotiate with the International Monetary Fund and the World Bank following the collapse of the country's currency, the lira, by 40 percent in February.

The IMF is expected to confirm its $8.5 billion offer soon, with the rest coming from the World Bank.

The deal will go before the IMF's decision-making board this week but Dervis told reporters during a trip to Washington for the IMF's spring meeting on Thursday that he expected the deal to be sealed in the next couple of weeks.

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IMF spokeswoman Conny Lotze said: "We can confirm we are close to an agreement on the programme with Turkey and a few details need to be worked out."

The money will be in addition to the $6.25 billion still left under an earlier IMF loan and $5 billion left under a previous World Bank loan.

One IMF decision-maker told Reuters: "We were all impressed by the strength of the Turkish programme and agreed that they deserve all of the support of the international community, but we did not discuss the numbers today."

Loan proposals are not brought before the board unless shareholders have agreed to back them in advance.

Turkey's media on Friday welcomed signs of the agreement with the IMF as a triumph for Dervis.

"Dervis gets what he wants!" proclaimed Milliyet newspaper. "The good news Turkey has been waiting for has finally arrived."

"Dervis sends good news from the United States," read a Hurriyet newspaper headline. The reports from Washington reached Turkey too late for any extensive newspaper comment.

Corruption allegations

If the $10 billion is confirmed it will be at the lower end of Dervis' call for between $10 billion and $12 billion and will not include bilateral support.

But Turkey's markets, which have been battered since the financial crisis, rose by about 7.6 percent in expectation of a deal.

They were also boosted by the prospect of the country's energy minister Cumhur Ersumer resigning, which would avoid any parliamentary investigation into corruption allegations.

Turkey will have to agree to a letter of intent to secure the structured loans.

It will have to deliver on its promises of reform before it can touch the money including a cut in government spending, the establishment of an independent central bank, a properly maintained floating exchange rate and an increase in its privatisation programme.

Turkey's latest round of problems began last year when a crisis hit its troubled banking sector. The IMF was forced to almost triple its lending to $11.5 billion.

But that programme, tied to curbing inflation, collapsed in February after markets became alarmed by a public argument between the country's prime minister and president over accusations the political investigations into alleged corruption were moving too slowly.

The IMF, in its World Economic Outlook report, said the Turkish economy would contract by 2.6 percent this year but would rebound with a solid 4.9 percent expansion in 2002.

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The World Bank
The Turkish Prime Minister's office
The International Monetary Fund
The Turkish Government

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