The AKP will speed up
privatization and liberalize the economy in its second term,
Turkeys new finance minister Mehmet Simsek has told
Emerging Markets. He also promised to restore public
finances, which were weakened when the government ramped up
spending ahead of elections in July 2007.
Fiscal discipline has been
the cornerstone of our successful programme, said Simsek,
and will be sustained. The former Merrill Lynch
economist is aiming for a primary fiscal surplus of 5.5% of GNP
in 2008, up from an estimated 4.3% surplus in 2007, although
lower than the 6.5% target in 2006 and 2007.
At the same time, Simsek said
reform measures would be focused on enhancing
Turkeys external competitiveness and increasing
employment. These included social security and labour
market reform, together with an overhaul of the energy
Social security reform is
essential for Turkeys long-term fiscal sustainability. A
reduction in the social security system deficits should provide
fiscal room for growth-enhancing measures, said
aim to reduce the tax burden on employment and make the market
more flexible to boost employment and reduce informal economic
activity, he added.
sector reform, Simsek said the primary objective was to ensure
security of supply, but the government also wanted to
deregulate the energy sector and divest both distribution and
generation assets, to create a more competitive
Serdengecti, former Turkish central bank governor and now a
director at the Economic Policy Research Foundation (Tepav) in
Ankara, told Emerging Markets that he is convinced by
the governments commitment to strengthening the budget
and social security balances.
Putting fiscal policy and balances back on track is of
vital importance for the successful continuation of the
stabilization program, as a tight fiscal policy would help the
management of the external balances by keeping domestic demand
under control, he said.
Social security reform has been on the agenda for a long
time now. I believe the government has no choice but to
introduce a sound reform package that will reduce the social
security deficit over time, Serdengecti added.
The IMF has
voiced support for the 5.5% primary surplus target in 2008,
and investors are keen to know whether the government
will sign a new agreement with the Fund when the current deal
runs out in May 2008. But Simsek told Emerging Markets
he was not yet ready to commit either way. The government has
been successfully implementing the current stand-by
arrangement, he said, and is focused on completing the
seventh review under that agreement.
think it is premature to discuss the future format of our
relations with the Fund, we have plenty of time to think about
it, Simsek added.
Ali Yavan, Ankara representative of the Turkish industrial and
business association Tusiad and a former official in the state
planning department, said a new IMF deal was important for
urge the government to sign up to a new stand-by or staff
monitoring programme, even on a non-credit basis. This is not
just for stability, it is needed to add sophistication to
measures like fiscal reforms, Yavan told Emerging
For in-depth analysis of Turkey's prospects in 2008,
"Second life for AKP in Turkey".