Turkey IMF deal an ‘easy sell’ for Erdoğan, columnist says

Turkish President Recep Tayyip Erdoğan has made it politically unthinkable to turn to the International Monetary Fund for financial aid, but the coronavirus outbreak presents him with a unique chance to secure one with little political cost, said Bobby Ghosh, a columnist for Bloomberg.

Turkey, despite its exhausted foreign currency reserves and growing budget deficit, is ruling out a new loan agreement with the fund. In the early 2000s, Erdoğan was the only prime minister to complete one after 18 attempts by his predecessors. But he has since labelled the fund as a loan shark and representative of the Western financial system he claims to abhor.

Agreeing to a loan accord would give Turkey access to capital at competitive interest rates, with relatively few geopolitical strings attached, Ghosh said on Monday.

“For a master at political messaging, this should be an easy sell,” he said.

Instead, Erdoğan has ordered his son-in-law, Treasury and Finance Minister Berat Albayrak, to “throw everything at the problem”, meaning interest rates in Turkey are among the world’s lowest, when adjusted for inflation, Ghosh said. It has also announced a plan to help businesses cope with the crisis worth $15.4 billion, which already looks inadequate, he said.

Now Turkey is talking with central banks around the world to secure access to hard currency via swap deals. It has existing arrangements with many monetary authorities that should make such agreements possible, Central Bank Governor Murat Uysal said at the weekend.

“Erdoğan has made it a badge of honour to keep Turkey and the IMF at a distance,” Ghosh said. “Even meeting with its officials has earned opposition leaders the condemnation of (ruling) AK Party officials."

The Turkish lira has slid by more than 15 percent this year, declining with other emerging market currencies. But in Turkey's case, it has less room for maneuver than many of its peers, having already slashed interest rates to record lows and spent tens of billions of dollars shoring up its economy after a currency crisis in 2018.

The lira rose from the lowest levels since the currency crisis on Monday, climbing 0.5 percent to 6.89 per dollar. It hit a record low of 7.23 per dollar in August 2018.

“At any other time, turning to the IMF would represent a loss of face for Erdoğan. But the pandemic provides a rare opportunity to escape the corner into which he has painted himself — without a political price,” he said.

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