Ankara shuns IMF help even as Turkish lira crashes to record low

Ali Babacan
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Updated 09 August 2020

Ankara shuns IMF help even as Turkish lira crashes to record low

  • The IMF won’t be sufficient to meet Turkey’s foreign financing needs, even if the government were to request assistance: Ali Babacan, Former finance minister

ISTANBUL: Despite the Turkish lira hitting a record low against the dollar and euro, Ankara has so far resisted asking for help from the International Monetary Fund (IMF).

Instead, it hopes to survive a looming balance of payments crunch without any foreign support beyond an extended swap deal with its regional ally Qatar.

In late May, Turkey tripled its existing local currency swap deal with Qatar to $15 billion as a remedy to its depleted foreign reserves.

Any request for help from the IMF would be a last resort, though the factual prerequisites for a deal are already in place.

On Thursday, the lira hit an unwelcome milestone, having lost nearly 20 percent of its value against the dollar since the start of the year.

But as the lira has long been hostage to domestic politics, experts note that the political costs of knocking on the IMF’s door would be higher for Turkish President Recep Tayyip Erdogan amid speculation over snap elections.

Nikolay Markov, senior economist at Pictet Asset Management in London, believes this will be an option of last resort given previous reluctance from Ankara to accept IMF loans.

“I think it is not on the table right now but may become an inevitable option later in the year if domestic economic policies do not adjust in the right direction. This is actually the best policy option to improve the country’s macro fundamentals and restore investors’ confidence in the medium to long term,” he told Arab News.

This year, Turkey’s economy is expected to contract for the first time in more than a decade, with 5 percent of that due to the effects of the coronavirus pandemic.

However, according to Nigel Rendell, a senior analyst at Medley Global Advisers in London, there is little chance of Erdogan calling in the IMF.

“It would be political suicide. He is completely against foreign ‘interference’ in the Turkish economy,” he said.

According to Rendell, a more likely option would be creeping capital controls to restrict the exchange of the lira for foreign currency.

Erdogan has promised that IMF assistance was not an option for Turkey, over fears that any dependence on the Washington-based institution may weaken his support. But as an alternative to the IMF, a swap transaction with the US Federal Reserve is seen as a possibility by Ankara, as well as an instrument to mend ties with the US.

Ali Babacan, Erdogan’s former economy tsar who recently formed his own breakaway party, DEVA, gave a surprise interview to Bloomberg, saying: “The IMF won’t be sufficient to meet Turkey’s foreign financing needs, even if the government were to request assistance, making currency swap deals with other central banks a necessity.”

But according to Babacan, “Turkey’s increasingly bellicose foreign policy makes such an arrangement more difficult. There is no such thing as exporting to countries we’re quarreling with and asking for swap deals like nothing happened.”

As Ankara is running out of alternatives to its monetary policy, and with its central bank’s gross FX reserves having dwindled to $51 billion from $81 billion this year, experts say Turkey will gain advantages if it renounces its complete rejection of any contact with the IMF.

Sergey Dergachev, senior portfolio manager at Union Investment, thinks that for investors, if the Turkish government even signals its willingness to meet with IMF officials, this will lead to positive initial sentiment towards Turkish assets.


Bosnia enters olive oil market with award-winning ‘liquid gold’

Updated 30 October 2020

Bosnia enters olive oil market with award-winning ‘liquid gold’

LJUBUSKI, Bosnia: Blessed with sunshine, virgin land and ample ground water, southern Bosnia is breaking into the olive oil market, winning medals and helping put the country on the map for “liquid gold.”

“When I started to plant olive trees, I was told: ‘You’re crazy’,” recalls Dragan Mikulic, 65, who runs a 50-hectare orchard in Ljubuski, in Bosnia’s southern Herzegovina region.

After little over a decade, he has become one of the top olive growers in the Balkans.

Wedged between high mountains to the north and the Adriatic Sea to the south, the grove’s 7,000 trees stand in perfect rows beneath sunny skies.

“Look at this sun. It’s like this all the time. The water coming down from these mountains passes through here, on its way to the sea,” Mikulic says.

“The soil consists of 30-percent sandy earth in which the trees breathe, and 70-percent stone, rich in minerals. It’s all here.”

‘With a gracious climate, uncontaminated soil and water, Herzegovina has unimaginable possibilities for the development of olive growing.’

Miro Barbaric Agriculture expert

But it was not that easy at the start.

Recalling the “madness” of the early days, he describes having to use “tons of explosives” to break up a rocky patch of scrubland and turn it into a flat surface where he could plant the trees.

“We chose the olive because it is, as we say here, the tree of God,” adds Mikulic, whose oil in recent years has won 32 gold medals in competitions in Italy, Croatia and Bosnia.

Other producers have now followed in his footsteps.

Officially, 776 tons of olives were harvested in Bosnia last year, 27 percent more than the previous year.

The industry is still small compared to neighboring Croatia, the regional leader.

But “with a gracious climate, uncontaminated soil and water,” Herzegovina has “unimaginable possibilities for the development of olive growing,” says Miro Barbaric, an agriculture expert from the Bosnian Agro-Mediterranean Institute.

Access to underground water has only been possible over the last 15 years thanks to new drilling techniques.

But it is key to the growth of this new crop in the region, once home mainly to tobacco.

Due to the lack of rain, the olive trees need between 150 and 200 liters of water per day, according to Mikulic, who has drilled two boreholes in his olive grove and installed a drip irrigation system.

His neighbor Jure Susac, a 66-year-old winegrower who also has olive trees now, says he drilled a borehole nearly 300 meters deep.

“I know that the olive loves a lot of water. I have plenty of it. The pump never stops working,” Susac says.

“And, voila,” he adds, pointing to the bunches of plump green olives on the trees “in excellent health” in his orchard, just a few days before the October harvest.

Susac has also won medals for his trees, the majority of which are bearing olives this year.

Hailing the turnout as “exceptional,” he hopes to squeeze out more than 500 liters of oil from them.

In every competition he entered with his oil, he won the gold medal, Susac says. “We are now often ahead of the Croatians.”