IMF-World Bank Summit Opens in Istanbul

Istanbul is hosting the annual International Monetary Fund (IMF) and World Bank (WB) summit on October 2-7. It is expected that around 15,000 delegates including the finance ministers from the G7 will attend the summit. World Bank President Robert Zoellick and IMF Managing-Director Dominique Strauss-Khan held press conferences on October 2. A series of seminars are scheduled to be held from October 3 to 5. The International Monetary and Financial Committee, or IMFC, is expected to discuss the impact of the global economic crisis on developing countries on October 4, while the Development Committee will convene on October 5 (Hurriyet Daily News, September 30).

Strauss-Khan was not welcomed by all segments of Turkish society. During at an event on October 1 at the Bilgi University in Istanbul a student journalist protester threw a shoe at him and attempted to storm the stage as he spoke (Hurriyet Daily New, October 2). Ironically, the protestor threw a Nike shoe, one of the symbols of a capitalist economy, which was ridiculed by major Turkish newspapers and media outlets (Star, October 2). However, perhaps the irony in the protest resembles the Turkish government’s resistance to IMF credits to restore its economy, which was primarily restored by IMF plans after the recession in 2001. Turkey has been the fund’s largest borrower this decade, drawing approximately $43 billion to help recapitalize more than 20 failed banks since 2001. Turkish Prime Minister Recep Tayyip Erdogan, strictly followed IMF policies during his first period in office in 2002-2007. However, since his re-election in 2007, he has resisted taking on new loans after more than one year of protracted discussions with the IMF.

Economists stress that Erdogan wants to show that his $600 billion economy can survive the global crisis without borrowing more money. Ahmet Akarli, an economist for Goldman Sachs Group in London, suggested that Erdogan has consistently said "no" to the IMF, despite domestic pressure and the views of the overseas business community. He most likely regarded dependency on the IMF loans as incompatible with his strategy of transforming Turkey into a leading global player and a heavyweight in its immediate neighborhood (Bloomberg, October 2). Speaking ahead of the annual IMF-World Bank summit, Economy Minister Ali Babacan firmly said that the meetings are not "about Turkish-IMF relations," adding that he will not "mention anything" about the issue during the meetings. "We decided not to mention IMF-Turkey relations," Babacan explained at a press conference on Wednesday. "Instead, we will focus on the global economy and how to deal with the current crisis," he continued (Hurriyet Daily News, September 30).

Despite the Turkish government’s resistance to IMF credits, the outlook for the Turkish economy is not positive. IMF reports indicate that the Turkish economy may shrink by 6.5 percent in 2009. Its prediction exceeds the government’s estimate of a contraction of 6 percent this year and is more than the 5.1 percent which the IMF predicted in its "World Economic Outlook" in July. The Turkish government expects to see a significant upturn in 2010 with 3.5 percent growth forecast (Hurriyet Daily News, October 1).

While facing social and political resistance in Turkey, Strauss-Kahn wrote an article in the Hurriyet Daily News underlining the importance of the role played by the IMF in the global economy. He listed the challenges facing the world economy then stressed the IMF’s critical role in resolving this economic crisis:

    "The IMF has an important role to play. It stands at the heart of the international financial architecture. As many emerging markets and low-income countries reeled from the effects of the crisis, the IMF stepped into the breach and provided necessary financing, while striving to protect the poor and most vulnerable. Recognizing the unique role of the IMF, world leaders pledged to dramatically increase our lending resources, including our concessional resources for low-income countries, and we have made our lending more flexible. The IMF also acted as a capable policy advisor, ahead of the curve on many issues, supporting the efforts of world leaders in securing a cooperative solution to the world’s economic problems. We continue to work on increasing the attraction of our advice," Strauss-Kahn argued (Hurriyet Daily News, October 1).

It appears that the IMF director wants to emphasize the importance of his institution, while the Turkish government, predominantly for political reasons, resists accessing additional IMF funds. Since his re-election Erdogan has used the IMF credit issue as one measure of his government’s economic success. Signing a new agreement with the IMF would certainly be a political blow for the Erdogan government. Therefore, he recently stated that: "Turkey does not sign an unconditional agreement with IMF; we will sign an agreement with the IMF only if it accepts the conditions that we set" (TRT, September 29).