Turkish PM pledges loyalty to IMF loan pact

Turkish Prime Minister Tayyip Erdogan put his personal weight behind a strict IMF economic recovery programme on Sunday, pledging "diligent and careful" implementation.

The International Monetary Fund deal, backed by $16 billion in loan payments, demands tough spending restrictions that may prevent Mr Erdogan's government from keeping some pledges to help the poor and boost economic growth.

"This government is completely determined on the implementation of this programme," Mr Erdogan said in a televised address to the nation. He became prime minister this month.

His comments will be welcomed by jittery financial markets and by the fund as it examines Turkey's economic plans for 2003, ahead of the possible payment of a $1.6 billion loan tranche, probably in mid-April.

The IMF pact has taken on increased importance since Turkey lost a US offer of up to $30 billion in grants and loan guarantees to support its economy during the war in neighbouring Iraq. Turkey failed to provide the military support the United States wanted in return.

Mr Erdogan warned his ministers and bureaucrats to abide by the IMF pact, which aims to slash chronic high inflation and help make a huge domestic debt load more manageable.

Turkish financial markets fell sharply last week as they digested the loss of the US support and the prospect of a costly war in neighbouring Iraq.

Analysts say rising real interest rates are a bad sign for the future of Turkey's $95 billion domestic debt load.

Ratings agency Standard & Poor's said Turkey risked a downgrade in its rating if the government failed to persuade markets that the country's finances were healthy.

Mr Erdogan said his Justice and Development Party (AKP) was determined to see the IMF pact through, even if the war upsets the balances of a budget being debated in parliament.

"We want to emphasise strongly that if needed we will support the programme with additional measures," he said.

"Our determination in fiscal policies to attain stability in the markets will also support measures that are taken by independent institutions, primarily by the central bank."