World Bulletin / News Desk
A sustained economic performance and further institutional reforms will be Turkey's medium-term challenges, World Bank director forTurkey, Martin Raiser, said on Thursday.
The country's recent ability to reduce its interest payments and take decisive steps in reforming its public financial management system has been successful, Raiser said.
"Turkey made its economy more stable in the eyes of investors. This creates a fiscal buffer, which allows investors to buy Turkish treasury bonds at much lower interest rate because they know that Turkey’s committed fiscal discipline," Raiser said.
"Turkey has used the reduction in its interest payments to increase payments on health and education," he said.
Two of Turkey's expected challenges for the medium-term, he added, will be comprehensive tax reforms, and further institutional reforms, such as the Court of Account Law and Procurement Law.
"I think we need to look at changing the structure of taxation, because at the moment the majority of taxes come from consumption-based taxes. What happens ifTurkey goes through a lower economic growth, and believe me it will, those tax revenues are going to be low as well," he said.
"It’s not enough for the government to say that they are going to be fiscally disciplined, they also have to have the legal institutional tools to do so," he added.
Turkey: No plan to change floating exchange rates
Turkey's Finance Minister Mehmet Simsek said on Thursday that there is no plan to change the country’s floating exchange rates or restrict capital movements.
Addressing Prime Minister Recep Tayyip Erdogan's comments on Wednesday about the reasons behind the interest rate rise, Simsek confirmed thatTurkey has no plan to restrict capital movements.
He added that Turkey will sustain its political stability and has strong public finances.
"The EU economies have been recovering from their domestic demands after five years. The crisis in the EU has made Turkey's account deficit increase due to the lack of demand in their export markets… We are very hopeful with the relationship with Iran," Simsek said.
"This will create a significant decline in Turkey's current account deficit and will have a positive effect on the economy in the long term," he added.
Turkey's Central Bank introduced a significant rise in its interest rates on Tuesday to prevent the lira from falling further against the dollar, after a sharp decline was seen last week.
The borrowing rate was raised to 8 percent from 3.5 percent on Tuesday, while the lending rate rose to 12 percent from 7.75 percent.Last Mod: 31 Ocak 2014, 09:25