Saturday April 28 3:19 PM ET
IMF Close to Sealing Turkey Aid Package

By Servet Yildirim

WASHINGTON (Reuters) - Turkish Economy Minister Kemal Dervis said on Saturday he hoped the International Monetary Fund and World Bank would approve $10 billion in new loans for his crisis-ridden nation in about two weeks.

Dervis said that if the loans were approved, Turkey would receive disbursements of between $3.5 billion and $4 billion from the two lenders by the end of June, cash desperately needed to help the country repair damage caused by a crippling economic crisis.

``The loan will be finalized after the IMF's board approves it officially. This may happen by May 11, 12 or 15,'' Dervis told Turkish media at a briefing, adding that the entire $10 billion would be made available this year.

``According to the offer, this resource will consist of $8 billion from the IMF and $2 billion from the World Bank,'' Dervis added.

On Thursday, Dervis gave slightly different figures for the division of the loan between the two lenders -- with $8.5 billion from the World Bank and $1.5 billion from the IMF.

Dervis said he expects the IMF's board to approve a letter of intent in the coming days, noting that Turkey would have to approve key pieces of legislation before it secured any of the new money.

Dervis did not specify those actions, but said, ``The legislative changes in the telecommunications and banking sectors are a must. They expect us to do these changes. We have to pass these laws in parliament before the IMF board meets.''

Turkish officials in Washington said Prime Minister Bulent Ecevit's coalition government would present those two key pieces of legislation to parliament next week.

The battered Turkish stock market and its lira currency were buoyed this week as expectations grew that the new loans would be agreed upon at this weekend's IMF meeting.

Turkish Central Bank Governor Sureyya Serdengecti told the same news conference that his bank would announce its new monetary program in the first half of May, which will help maintain the new floating exchange rate regime.

Deal Nearly Finalized

Earlier, IMF First Deputy Managing Director Stanley Fischer said: ``We are very close to finalizing the details.''

``The great bulk of the negotiations have been completed,'' Fischer told reporters at IMF headquarters.

German Finance Minister Hans Eichel said his country would have preferred a bilateral solution in which all Group of Seven or Group of 10 nations would provide aid to Turkey directly rather than via international institutions such as the IMF and the World Bank.

But in the absence of full G7 support for such a solution, an IMF-led rescue was the best possible option, Eichel said.

``Germany was ready to offer bilateral help, but there was no full G7 support,'' Eichel told a news briefing in Washington ahead of the full meeting of the G7 ministers.

The G7 is made up of the United States, Britain, Canada, France, Germany, Italy and Japan. The broader G10 includes those countries plus Belgium and the Netherlands, Sweden and Switzerland.

Eichel said that both France and Britain preferred funneling aid to Turkey via the IMF and the World Bank rather than through coordinated G7 action.

Turkey sought fresh aid to implement an economic program put together by Dervis to pull the country out of an economic and financial crisis.

Late last year, Turkey received an $11.5 billion IMF loan package tied to a program that was focused on curbing inflation. But the crisis, sparked by a ramshackle banking sector, was worsened in February by a lack of political resolve to push through vitally needed reforms.

That led Turkey to abandon its IMF program and float its lira currency in February. The currency has been battered since, losing about 40 percent of its value.

In addition to the fresh loans, $4.3 billion of its already existing IMF loan will also be given to Ankara this year.

Dervis said the new loan was greeted with ``firm and sincere support'' by the IMF's board. He said he would visit Wall Street in New York on Tuesday in a bid to boost foreign capital inflow into the Turkish economy. He said the U.S. Treasury was also firmly backing the Turkish rescue deal.

Dervis also plans to visit major financial centers in Europe to attract more foreign direct investment.

Turkey needs the cash to overhaul a banking sector made up of creaking state-owned giants and an array of smaller private banks suffering to varying degrees from the chaos of the crisis. Dervis has pegged the cost of straightening out the books of the state banks at about $16 billion, while private estimates run as high as $25 billion.

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