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Turkey Signals Compromise With IMF

July 9, 2001

ISTANBUL, Turkey (AP) _ Turkey’s government reluctantly bowed to pressure from the International Monetary Fund on Monday, agreeing to make changes to the board of state-owned Turk Telekom in return for the release of a $1.6 billion loan.

In a statement released after a 90-minute summit of coalition leaders Monday, Prime Minister Bulent Ecevit said the government would summon Telekom’s general assembly to ``make the necessary changes″ to the company’s board.

The IMF last week halted the loan, part of a $15.7 billion crisis recovery package, citing Turkey’s failure to appoint a board of directors with private sector experience to Turk Telekom, the state fixed-line monopoly which is slated for privatization. The World Bank followed suit, postponing a $1.7 billion loan to Turkey.

The standoff dragged Turkish shares down around 10 percent last week, and sent Treasury bond interest rates soaring to 99 percent _ fueling fears that Turkey may struggle to repay its mounting debts.

The government ``had difficulty understanding why this issue has been considered so important″ by the IMF, Ecevit said in the statement. He said they decided to summon the Telekom assembly ``to avoid overshadowing our relations with an artificial problem.″

Financial markets remained jittery. Turkish shares had risen some 1.6 percent Monday morning in anticipation of a solution on Telekom, but these gains were wiped out in early afternoon trading following Ecevit’s statement, which does not specify what changes will be made.

Ecevit also said the government would accelerate the sale of private sector banks taken into receivership, another IMF concern.

The appointment of Telekom’s board saw clashes between the coalition partners last month. Kemal Dervis, the economy minister, pushed for a board made up of private sector experts, while Enis Oksuz, the transport and communications minister from the government’s nationalist wing, wanted to appoint directors close to his own party.

A compromise adopted last month allowed Oksuz to appoint four of the board’s seven members.

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