Announcement of Turkey’s Economic Adjustment Supported by World Bank on June 18, 1984

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. BANK NEWS RELEASE NO. 84/96 Contact: Fawzi Rihane June 18, 1984 (202) 477-5325 TURKEY'S ECONOMIC ADJUSTMENT SUPPORTED BY WORLD BANK Turkey's economic adjustment program, one of the most significant undertaken by a developing country in recent history, is being assisted by a $376 million loan from The World Bank. The loan completes a series of five totalling $1.56 billion, which have supported a major restructuring effort initiated by the government in 1980 and still under way. The aim is to change the direction of the country's economic development by replacing an industrialization strategy based on import substitution with one that places greater reliance on market forces and exports. The economy has shown an impressive response so far. Since 1980: * inflation has fallen from an annual rate of about 107 percent to about 31 percent in 1983. * exports increased from $2.9 billion to $5.7 billion in 1983, and several new markets were developed; * the current account deficit declined from $3.2 billion (5.6 percent of GNP) to about $2 billion (3.4 percent of GNP) in 1983; * the ratio of the government budget deficit to GNP fell from 4.6 percent to 0.5 percent in 1983. The program supported by the loan includes the development of a medium-term framework and preparation of action plans for the agriculture and energy sectors. It also includes policy measures in the areas of import liberalization, rationalization of public investment, debt management, and financial sector reform. The loan of $376 million will finance about 4 percent of Turkey's total merchandise imports and about 13 percent of the gross capital inflows in the period mid-1984 to mid-1985. The series of structural adjustment loans forms only one part, although an important one, of the support that the Bank has provided to the government's reform program. The Bank's assistance also includes project loans, economic and sector policy advice, and technical assistance. The World Bank loan is for 17 years, including four years' grace, with a variable interest rate, currently 10.08 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on undisbursed balances and a front-end fee of 0.25 percent on the amount of the loan. NOTE: Money figures are expressed in U.S. dollar equivalents.