Whose success? Mr. Derviş or Mr. Unakıtan?

Turkey has implemented over 19 International Monetary Fund (IMF)-based major and minor stabilization programs to-date. As is well known, a standard IMF program aims to improve the balance of payment accounts, improve efficiency in public sector debt management and reform the whole system towards a functioning market economy, including major privatization, and liberalization of the trade and financial accounts. In order to achieve these general goals, the IMF provides long-term credits with appropriate rates as compared to the domestic situation of the borrower country. Since 2003 the latest IMF program has been implemented by a new and single-party government. Current data to hand in terms of major macroeconomic indicators such as growth performance, per capita GDP, trends in CPI, budget deficit and public debt make obvious the success of the current government. There are some arguments, however, insinuating that any successes of the program go back to Mr. Kemal Derviş, as he finalized the architecture of the IMF program during his ministerial term, and arguing that this government simply implemented the program. I interpret this argument as a caricature of reality for many reasons. First of all it can not be argued that current program is a “home made” one in which national priorities were imposed during Mr. Derviş’s term This is one of the well known aspects of IMF programs, harshly criticized by many famous anti-IMF economists, Nobel Prize winner Joseph Stiglitz being the most recent. The IMF programs are standard packages, including well known conventional “belt tightening” measures, tough medicine for the society. In other words the programs are one-sided and simply imposed. It is up to you as a borrower country to succeed under the “given” conditionality. Therefore at least a significant part of the success must be explained by the quality of implementation. In that regard success of the current program definitely belongs to the current government. As a matter of fact, legitimacy of the stabilization programs is a critical yardstick for the success of the program. This legitimacy has been achieved and even maximized by the current government. What is obvious is that in order to substitute the legitimacy of the program, whose creators became political castoffs in the last election of 2002, the strong support of society must be harvested by party programs. Now we are passing through a year of double elections. Normally we should not expect any government to preserve fiscal discipline during election distress. However the Justice and Development Party (AK Party) government continues keeping budget discipline without electoral concerns. Finance Minister Kemal Unakıtan released the breakdown of Turkey’s budget for the first five months of the year. Taking the figures for the whole of the first five months, Unakıtan said the budget deficit had declined to YTL 3.34 billion. On the other hand the primary surplus from January through the end of May stood at YTL 20.32 billion. As it is known, the primary surplus excludes interest payments on debt load and is a good indicator of state finances. Budgetary performance is just one example of how and why this government should be seen as the champion of the last IMF-based stabilization program.

14.06.2007