After paying down debt rapidly for several years, this week saw Turkey enter a debt-free relationship with the IMF after 19 years as a debtor. It made for big news in 2008 when Turkey failed to enter a new standby agreement with the IMF signalling its confidence and desire to stand on its own two feet — quite a time to feel confident amidst the global financial crisis.
Turkey was to pay the last instalment of $422.1 million installment to the IMF on Tuesday 14 May Turkish Deputy Prime Minister Ali Babacan said the day before the momentous payment.
“Up to this day, Turkey has signed 19 stand-by agreements with the IMF. We ended the last one in May 2008, and we haven’t used loans for five years,” Babacan said during a live interview aired on private broadcasters NTV and CNBC-e.
Turkey has borrowed nearly $50 billion from the fund in 47 years, but the country’s debt to the fund has been decreasing since the AK Party came to power in 2002, at which point $23.5 billion was owed. Turkey’s last standby agreement with the fund was in 2005, and it expired in May 2008.
At the time Turkey looked set to enter a new standby arrangement, but months of negotiations ended without pen touching paper.
“At that time we decided we didn’t need the IMF, and we haven’t needed it since,” Babacan said, adding the foreign capital flow that came to Turkey “thanks to maintained trust and stability” has pumped an impetus into the private sector that ruled out the necessity of IMF financing.
Babacan also noted the prescriptions of the IMF were formed in accordance with the government’s own program and Turkey had not been forced to do anything it was not content with.
Turkish Prime Minister Recep Tayyip Erdoğan, however, had complained about the IMF directives during his speech at the European Bank of Reconstruction and Development’s annual meeting held in Istanbul last weekend.
“It [the IMF] is trying to give political lessons, but I’m a politician. I would listen and learn politics from a politician but not from an officer of the IMF,” he said, criticizing the global lender’s conditions.
The fact that Turkey is not only no longer a debtor, but has in fact become a contributor to the IMF, after being asked in a special request to contribute $5 billion, is a testament to the changing face of global economics as the emerging markets of yesterday and today make the transition to become the established and even advanced economies of tomorrow.
The IMF made a special request to Turkey to lend $5 billion during the Group of Twenty meeting held in Mexico in November, said Babacan, one of the participants at the meeting.
Wiping out its debt and becoming a contributor makes Turkey a part of a global transformation that sees changing roles, according to Babacan.
“Recently, advanced countries have also started to receive IMF loans. Turkey will also change the picture by paying the last part of its debt,” he said.
Elaborating on the conditions of its contribution, he said the Turkish government had asked for the source to be kept among Turkish reserves and liquidity for it to be available for withdrawal in case it is needed. This way the loan will be not reflected as a loss in Turkey’s current account balance figures.