WHO'S ON FIRST? TURKEY AND THE IMF

C O N F I D E N T I A L ANKARA 001228 SIPDIS EEB FOR A/S SULLIVAN EUR FOR DAS BRYZA TREASURY FOR JROSE E.O. 12958: DECL: 07/07/2013 TAGS: ECON EFIN TU SUBJECT: WHO'S ON FIRST? TURKEY AND THE IMF REF: A. ANKARA 1221 ¶B. ANKARA 1026 ¶C. ANKARA 1014 ¶D. ANKARA 524 Classified By: Acting Econ Counselor Rebecca Neff for reasons 1.4 b and d. ¶1. (C) Summary. On May 10, Turkey's stand-by arrangement with the International Monetary Fund (IMF) ended. Reftels detail the importance investors place on Turkey continuing to have a strong relationship with the IMF, including the ability to borrow if the economy goes south. In separate meetings, high-level GOT and IMF officials told us negotiations on a new precautionary stand-by arrangement may begin soon. Concluding a deal would be an important step for investor confidence and calming market uncertainty. ¶2. (C) The IMF and Turkey appear to be inching toward a new deal despite bureaucratic formalities. The IMF told us they are ready to negotiate a deal as soon as the GOT makes a formal request; meanwhile, the GOT said they are ready to make a deal when the IMF is ready. Ankara 524 details a statement from Treasury Minister Mehmet Simsek that Turkey did not need a new stand-by arrangement with the IMF. In the five months since then, global conditions and market reaction have called for a turnaround in that policy. Two weeks ago, Simsek announced he was "willing to entertain" the idea of a precautionary stand-by and would request negotiations with the IMF. Ten days ago we met with IMF Resident Representative Hossein Samiei, who said he was willing to talk with the GOT about a precautionary stand-by as soon as a request was made. One week ago, Treasury Director General of Foreign Affairs Memduh Akcay told us the IMF was holding off on talks and waiting to learn the outcome of the pending Justice and Development Party (AKP) closure case. Three days ago, the IMF confirmed that the GOT has still not made a formal request for talks. ¶3. (C) Comment: While the debate continues over who asked whom to dance (or not),the talks will likely begin soon and the end result will most likely be a precautionary stand-by arrangement. The GOT will continue to repay its $10 billion obligation to the IMF as agreed and be in a position to borrow more, if needed, in the future. All the investors and rating agencies we talk to would like to see another deal signed and sealed. Action on an agreement will help calm uncertainty and rebuild some investor confidence in the GOT's commitment to economic responsibility. End comment. Visit Ankara's Classified Web Site at http://www.intelink.sgov.gov/wiki/Portal:Turk ey WILSON