Turkey, IMF agree on major loan deal

Turkey and the International Monetary Fund have agreed in principle on the conditions of a new loan deal worth up to $45 billion to help the country weather the global crisis, newpapers reported on Friday.
Pressure for an accord has mounted as the economy slumped in recent months, putting it on course for deep recession. Gross domestic product tumbled 6.2 percent in the fourth quarter and industrial production slid by a quarter in February.
The reports, citing Economy Minister Mehmet Simsek, said the deal would meet Turkey's external financing needs.
Business daily Referans reported Simsek as telling reporters he hoped to have the deal approved by the IMF in two to three weeks.
Daily newspaper Radikal reported that the deal could be worth as much as $45 billion and would be signed for a three-year term. Other newspapers quoted different amounts.
The initial size of the deal was seen at $20 billion, analysts said.
Simsek was quoted as saying that Prime Minister Tayyip Erdogan and IMF Managing Director Dominique Strauss-Kahn have agreed in principle to the foundations of a deal.
"We've agreed to a set of principles, within that framework our hope is to finish the work (on the deal) on Turkey's side before its spring meetings," Simsek was quoted saying, referring to the next IMF meeting in about two weeks' time.
SPENDING RESTRICTIONS
One of the key principles of the prospective new deal was to avoid new measures aimed at raising new revenues to compensate for cuts in special consumption and value-added taxes.
The two sides also agreed to restrict spending or set a limit for the budget deficit.
"This is very positive and diminishes the investment risks associated with Turkey. Therefore investors should not focus on the absolute loan size because that is irrelevant. All in all positive expectations still prevail in the market," said Tera Stockbrokers in a note.
The lira <IYIX=>, which has gained in recent sessions on expectations of a deal, was trading at 1.5620 against the dollar in early trade, firming from the previous day's close of 1.5690.
Talks with the IMF on a stand-by deal were suspended in January due to disagreements over issues such as unregistered income, government spending and tax administration. Turkey's previous $10 billion loan deal with the fund expired last May.
The worsening slump, fuelled by the global financial crisis, reflected a slide in domestic demand and a sharp decline in exports, reinforcing analysts' expectations that the central bank will continue cutting interest rates in a bid to revive growth.