ECONOMY PREPARES FOR POST ELECTION PERIOD

Now that the adventure for toppling the Government in Parliament and postponing the elections to next year is almost over, it is time to deal with more serious post-election affairs in both the political and economic fields.

Below is the story of what to expect in the economic field after the elections, as the expectations for the political developments are too clear to bother about. It will be an ANAP-DSP coalition with possible "spare tyres" (the DYP or a smaller party which may pass the 10% national threshold such as the MHP or the CHP) to keep the vehicle going if they fail to get over 50% of the seats. The nation will go to the elections on April 18^th and the State will help its smooth functioning as General Kivrikoglu did during the latest crisis.

The adventure by the FP plus the 116 dissidents from all political parties unrolled to the letter to the expectations and forecasts of Pulse. On Monday (22^nd), PM Ecevit survived the vote-of-confidence ordeal quite comfortably with a margin of 40 votes and closed the last page of this adventure. While the Government front was edgy about going to their constituencies to canvass for the elections, the dissidents were saying "We have nothing to lose," and kept Parliament in session without any productive work, as things stood at the time of writing this article.

As for the real aim of the latest adventure, that is to say postponing the elections to 2000, it has already proved to be an unrealisable dream. Why? Because:

• The Government front (158 parliamentarians from ANAP, DYP and DSP) applied to the Constitutional Court for declaring everything unconstitutional after the first day’s debates of the emergency session on March 13^th. The Speaker, Hikmet Cetin, who chaired that sitting of Parliament, clearly committed suicide as a prominent and popular politician heading for the top position of the Turkish Republic, the Presidency, with his unwise and misguided conduct against the Standing Orders and the Constitution. He later tried to make up for this mistake and acted much more reasonably on the strife over the postponement of the elections, but he still emerged with grave scars from the whole affair.
• Another political figure who had slight injuries from the latest adventure was President Demirel. His calls for and even persistent efforts to postpone the elections were known. The key role of the Demirel family’s son-in-law, ANAP parliamentarian Ilhan Kesici in organising the 116 dissidents was also common knowledge. Rumours were rife in Turkish politics that Demirel was manoeuvring to extend his mandate for another term after the seven-year period ends in May 2000, by amending the Constitution. What’s more, the DYP Chairperson, Tansu Ciller, and DYP Deputy Speaker Kamer Genc were quite outspoken about these rumours. Under these conditions, the President should not have said that postponing the elections from April 18^th would not be the end of the world because it provided the dissidents’ with a trump card for exploitation in their desperate move. Luckily, the Chief of the Turkish General Staff, General Kivrikoglu, and later on President Demirel corrected the exploitations that arose from that remark. The President is now committed to do his part about holding the elections in April and he is now doing so perfectly. He spoke against the attempts by the FP’s Acting Speaker, Yasin Hatipoglu, on Sunday (21^st) to bypass the Constitutional Committee in trying to repeal the decision and law to hold the elections in April.
• Technically, it is no longer possible to pass a bill to cancel the law for the April elections, because it has to pass through the Constitutional Committee, and with the Government Front’s majority (14 to 10) it never will pass through the Committee. Even though nine dissidents’ adherence to the DTP and making it a formal parliamentary group may result in reshuffling the parliamentary committees, there is clearly no time for all these manoeuvres.
• "The elections will be held. There is no other way", is what the people told PM Ecevit with posters at his Trabzon rally and he has been repeating it everywhere he goes.

The economy plays for time until the post-election period

Assuming realistically, therefore, that the elections will be held in April and result in a DSP-ANAP coalition, the question now is what the economy is heading for and who will be in charge of the economy.

The DSP’s Deputy PM, Hikmet Ulugbay, has already made contacts with the IMF, the USA and international finance quarters for the economic arrangements ahead with the western world. These contacts boil down to receiving $10 billion or so from the IMF, the World Bank and other international institutions and finance markets, under the IMF’s patronage with a special arrangement by the new Government. The economy experts of ANAP, Gunes Taner and Isin Celebi, for their part, are busy planning for the post-election period. The nation will determine with its votes who will be in charge of the economy, the DSP or ANAP, after April.

Everyone is unanimous that, despite the strong fundamentals of the economy, there are serious problems facing the rulers of the economy after the elections.

Gunes Taner is more pessimistic than most people about these problems and says, "We are in for trouble. Hell is in store for the new Government after the elections as far as the economy goes." ANAP rulers say, "No one is bothering with it in the midst of this political strife over the censure motion and the postponement of the elections, but very serious signals of danger have begun to appear in the economy."

Carefully refraining from speaking against the Ecevit Government as a potential coalition partner, Taner believes that the present Government’s economy ministers have not been firm enough in discarding populist economic policies. He is alarmed that the Budget revenue is not keeping up last year’s remarkable growth and that the Budget has begun to have deficits.

In the first two months, the budget had a TL1,673 quadrillion deficit, with TL3,647 quadrillion expenditure and TL1,974 quadrillion public revenue. The deficit excluding debt servicing was TL87 trillion in this period.

The payments by the Government to farmers for their crop sales and to contractors for their services are considerably in arrears in order to keep these deficits as small as possible, notes Taner. He told a journalist during the voting in Parliament last week:

"They (the Government) owe sugar beet growers TL200 trillion. Cotton growers are expecting TL70 trillion premium payments. The TL42 trillion payment to the Agricultural Bank for hazelnut purchases is in arrears. They have to pay TL6 trillion to olive oil producers, TL200 trillion to tobacco growers, and before long TL450-500 trillion for cereals’ purchases. There are also debts amounting to trillions of Turkish Liras to contractors. Add to it the fact that the budget discipline has begun to be upset…" And he added, "Isn’t this picture indicative of the hell in store for the new Government?" Asked if he is scared he said, "No, I have just drawn the picture. I am finding out where we stand. Certainly, our task is getting harder, but my program is ready. We can come on top of this matter."

The other economy expert of ANAP, Isin Celebi, also believes that the economy is not being governed with due care at the moment, but takes exception to the word "hell" to describe the economy. He notes that the Budget had a TL417 trillion surplus in the first two months of last year when the debt interest payments were excluded and it has a nearly TL100 trillion deficit this year. "This is a grave development, but the real problem is not in the budget, it is in the real (productive) economy," he says. "In no time, we can rectify the budget discipline that tends to be upset at the moment. We can also pay the accumulated overdue payments to farmers and contractors. But what worries me more is the negligence of the real sector’s problems. I do not believe that they are duly established or tackled. They are dangerously growing because of this negligence," says Isin Celebi.

Economic problems and public debts are rolled over pending elections

The present caretaker Government has promised nothing else to the nation but to safely conduct the elections in April without resorting to populist policies in the economy and that is exactly what it is trying to do. It has no claim to improve the economy or solve problems, but is only rolling over the debts.

At the debates for the censure motion on Saturday (20^th), the Government Spokesman, Sukru Sina Gurel, said that in the first four months of this year they were carrying out more debt servicing than they did in the whole of 1998.

In the first quarter, the Treasury literally rolled over public debts. In this period, the Treasury repaid almost $14 billion domestic debts and borrowed domestic debts equal to 95% of it. To be exact, TL4.985 quadrillion ($13,832.9 million) domestic debts were repaid and TL4.683 quadrillion domestic debts were incurred in the first quarter.

However, the dilemma of the Government is that to be able to get TL4.683 quadrillion through borrowing it had to issue TL8.965 quadrillion bonds. In other words, domestic debts are doubling up every year in terms of the TL and this cannot possibly continue after the elections.

According to a report published by the Treasury entitled "Turkey’s External Debt Projections Between 1999 and 2004", Turkey has to repay $61 billion external debts up to the year 2004 - $14.9 billion in 1999, $16.6 billion in 2000, $11.7 billion in 2001, $9.8 billion in 2002 and $7.8 billion in 2003. With $31,983 million more to be repaid after 2004 this debt servicing reaches $92,977 billion of which $17,410 billion is interest.

Economy rulers note that this external debt stock is not too heavy for the Turkish economy. In 1998 Turkey’s balance of payments had a $2,692 million surplus, compared to $2,638 million deficit in 1997, according to a Central Bank press release last week. Instrumental in this favourable development were the increases in workers’ remittances, improvements in the balance of payments that narrowed the gap between imports and exports and incomes from several services.

Economist Gungor Uras explains in Milliyet (23^rd) that Turkey’s regular foreign exchange revenue totalled $63.5 billion in 1998 and expenditure $60.9 billion, the balance being $2.6 billion surplus. In 1997 they were $58.8 billion and $61.4 billion, respectively, the balance being $2.6 billion gap.

As for the capital movements of the balance of payments, Turkey managed to increase its foreign exchange reserves, despite $6,386 million exodus of portfolio investments, due to the global financial crisis. This was achieved without receiving any support from the IMF and this balance of payments performance was a success for the Turkish economy, notes Gungor Uras.

In 1998 exports totalled $26,881.4 million and this nearly $26.9 billion may further go up when the December figures are finally known.

The Governor of the Central Bank, Gazi Ercel, said last week that the Turkish economy had four strong sides and three failures. The strong sides were:

1. The economy has a strong infrastructure, ie the fundamentals are sound.
2. The balance of payments is healthy. The current expenditure gap has been only 1% of the GNP in recent years and this is the strongest aspect of the Turkish economy.
3. Turkey’s potential growth is high. The average growth rate in the last 25 years was 4.7% a year.
4. The free market economy has been settled and functioning healthily in Turkey.

The weaknesses of the Turkish economy, on the other hand, are the high inflation rate, the gap in public finances and political instability. "In my opinion," said the Central Bank Governor, "the strength of the Turkish economy is ahead of its weaknesses by four to three. Turkey can overcome any difficulty when it marches against problems. Take the inflation rate. It has been lowered to below 50% as calculated in 1998."

Deputy PM Hikmet Ulugbay said on March 17^th that they were overcoming the financial crisis, the stocks in the inventory had been used up especially in the textile sector, and industry was re-employing the workers it had laid off. Exports were picking up with the help of $400 million resources raised for Eximbank, he said. "Interest rates have fallen below 100%, an important distance has been covered in the fight against inflation, and fiscal discipline has been achieved. We are going on with the 3-year economic stability program without any concessions on the principles," he said. After the elections, they would set in motion a new anti-inflation program with the support of IMF funds and reduce the inflation to one digit by the end of 2001, he said. uras@ada.net.tr, March 24^th, 1999