Conformed Copy - L4588 - Financial Sector Adjustment Loan - Supplemental Letter 1

Page 1 REPUBLIC OF TURKEY December 21, 2000 International Bank for Reconstruction and Development 1818 H Street, NW Washington, DC 20433 United States of America Re: Loan No. 4588 TU (Financial Sector Adjustment Loan) Macroeconomic Policy Indicators Dear Sirs or Mesdames: This refers to the provisions of paragraph 2.02 (d)(B) of the Loan Agreement (Financial Sector Adjustment Loan) of even date herewith between the International Bank for Reconstruction and Development (the Bank) and the Republic of Turkey (the Borrower). The Borrower hereby confirms to the Bank that the indicators set forth in the attachment to this letter shall serve as the basis for the Borrower to measure the progress achieved in the implementation of its macroeconomic policy framework. Very truly yours, REPUBLIC OF TURKEY By /s/ A. Umit Gonulal Authorized Representative Attachment REPUBLIC OF TURKEY Financial Sector Adjustment Loan Macroeconomic Policy Indicators 1. The year-on-year inflation rate: the target for end-2001 is 12 percent for the CPI. 2. The GNP growth rate: the target for 2001 is 4-4.5 per cent. 3. The primary surplus of the consolidated public sector This definition of the consolidated public sector is used in the IMF Standby arrangement. It includes the flow of duty losses of the state banks.: the target for 2001 is 5 per cent of GNP. 4. The stock of public sector debt This definition of the public sector debt includes the stock of duty losses of the state banks. 5. The current account balance: the current account is projected to register a deficit in the range of 3.5 per cent of GNP in 2001. 6. The external debt service ratio (TDS/XGS): the debt service ratio is projected to remain below 40 per cent in 2001. 7. The level of net international reserves of the Central Bank of Turkey: the target for 2001 is US$12.4 billion. Page 2 8. The level of external debt (DOD): the target is 60 per cent of GNP in 2001.