Turkish President Recep Tayyip Erdogan rejected the possibility of Ankara seeking financial assistance from the International Monetary Fund (IMF) despite the possible severe consequences of the pandemic in the country whose economy was burdened by problems caused by the president's policies even before the outbreak of the coronavirus, reports Radio Free Europe (RSE) writing of Western media .
Erdogan's spokesman Ibrahim Kalin said on Sunday that Turkey was not planning an agreement with the IMF, Reuters reported, indicating that Ankara was considering financing options that would ease the economic consequences of the spread of the coronavirus.
"The IMF is not on our agenda," said Kalin, clarifying that neither a loan nor a new "standby" arrangement with the IMF is in the plans.
The comment of Erdogan's spokesman, according to Reuters, came after IMF Director Kristalina Georgieva said on Thursday that the organization is in "very constructive engagement with the entire membership, including Turkey."
Officials told Reuters last Sunday that Turkey was discussing a currency arrangement with the US Federal Reserve and was considering other financing options, after concerns that reduced foreign currency reserves could hamper Turkey's response to the pandemic. Although the US and Turkey are allies in NATO, the agency points out, the two countries have been at odds over a number of issues in recent years.
The sensitivity of the issue of foreign funding is reflected, as indicated by Reuters, by the jump in the value of the lira after Georgieva said that her organization is also talking to Turkey. Due to the desire to stabilize the lira last year, the central bank intervened in the market, which led to a reduction in reserves.
Ankara's refusal to turn to the IMF comes as the coronavirus crisis fueled speculation that Erdogan, whose country has limited foreign currency reserves and large external financial demands, will have to abandon his vow never to seek aid from the organization again. Financial Times.
Even before the coronavirus crisis, as indicated by the British newspaper, the Turkish economy was still recovering from the consequences of the currency crisis in 2018 after the recession and the jump in unemployment, and now it has to fight with the Covid-19 pandemic and the consequences of the global recession and the flight of global investors to safe investments , pulling tens of billions of dollars out of emerging markets.
Turkey's reserves, which were considered inadequate even before the crisis, have fallen further in recent weeks. Total foreign currency reserves, including gold, stood at $89,6 billion at the beginning of April, while $12 billion in debt installments are coming due in the next 172 months.
Although Turkey has discussed with other Group of 20 countries a temporary exchange of currencies between central banks (swap line) to strengthen its hard currency reserves, such agreements have not yet been reached, according to the Financial Times.
While Turkey is in danger of running out of foreign currency reserves as its economy succumbs to recession amid the Covid-19 pandemic, the only question for Erdogan is which economic taboo will he break, Bloomberg points out.
The last time the IMF helped Turkey in 2001, a financial crisis swept an entire generation of Turkish politicians from power and paved the way for Erodogan's rise. Asking for help from the IMF would be a reversal for Erdogan, who has repeatedly said that Turkey has "closed that chapter", according to Bloomberg, adding that the conditions accompanying the IMF package would likely end Erdogan's growth-at-any-cost approach.
Despite Turkey's history of runaway inflation, economists have also mentioned the possibility of printing money to help provide the stimulus needed to boost growth. There is also the possibility of introducing capital controls, which according to analysts is a double-edged sword since it forces desperately needed capital out of the country. Turkish officials have previously argued that this is not an option even as they struggle to stabilize the economy.
However, the price of doing nothing could be by far the highest, according to Bloomberg. If the authorities drain the reserves so much that they can no longer defend the lira, Turkey could, analysts say, be at risk of a devaluation that would especially damage companies dependent on external financing.
However, the text adds, Turkey is largely to blame for its own problems, as Erdogan's demands to lower borrowing costs have undermined Turkish confidence in the lira and fueled the dollarization of the Turkish economy.
The Covid-19 pandemic has caught governments around the world off guard, but Erdogan, during years of political and economic mismanagement, has put his country in perhaps the most vulnerable position of all developing countries, the director of the Turkey program at the Foundation for Defense of Democracies says in Foreign Policy Aykan Erdemir and John Lechner, a graduate student in the Department of International Politics at Georgetown University.
If Erdogan insists on repeating his mistakes from the past, he will cause Turkey economic ruin with financial and geopolitical consequences that will last long after the pandemic, the text states.
Turkey's empty coffers are one of the reasons that Erdogan could only announce an anemic $15 billion stimulus plan, which is 1,5 percent of Turkey's GDP and far less than other countries' similar programs, according to Foreign Policy and indicates that left without many tools, the president resorted to a "donor campaign", asking citizens for help, while there are reports that civil servants are being asked to give up part of their salaries, which they will be hard pressed to refuse for fear of being fired in the next round of Erdogan's purges.
The double crisis - financial and health - highlighted Erdogan's "worst instincts for survival", Erdemir and Lečner assess, stating that at the beginning of the pandemic he disappeared from the media, leaving the health minister to communicate with the public and probably accept the blame.
On the other hand, concerned about the good work of opposition mayors in Ankara and Istanbul municipalities, Erdogan criticized them for unapproved fundraising campaigns and blocked local accounts to help residents of those cities. While avoiding blame for the death toll, Erdogan sees the coronavirus as another opportunity to consolidate power by introducing draconian measures, the authors of the text say.
By the end of the month, more than 400 people had been detained on charges of "attempting to incite unrest" for posting on social media, while eight journalists were being questioned for reporting on the coronavirus. Erdogan's actions in previous political and economic crises promise new restrictive political measures, Forin Polisi concludes in the text.
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