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Why Erdogan Won’t Ask the IMF for Help

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An expert's point of view on a current event.Turkey’s economy is a dam waiting to break. The lira has lost of its value against the dollar over the last three years, while Ankara, as of last month, its net international reserves (excluding swap lines) in an of the currency. Turkey’s nonfinancial companies, already drowning in foreign exchange liabilities totaling some , continue to pay the price. Yet Turkish President Recep Tayyip Erdogan is still unlikely to sign a bailout deal with the International Monetary Fund (IMF), despite the country’s need for it.That’s because Erdogan prefers quick fixes. One example of this is his recent of the lira-riyal swap line with Qatar—a temporary arrangement that boosts Turkey’s Central Bank reserves on paper—from $5 billion to $15 billion rather than negotiating what Turkey’s ailing economy desperately needs: a or an with the IMF, which would provide the country with a medium-term low-interest loan in exchange for committing to structural reforms.The obstacle for Turkey’s strongman president isn't ideology; it's IMF conditionality and its potential to undermine his hypercentralized style of governance.Turkey’s economy is a dam waiting to break. The lira has lost of its value against the dollar over the last three years, while Ankara, as of last month, its net international reserves (excluding swap lines) in an of the currency. Turkey’s nonfinancial companies, already drowning in foreign exchange liabilities totaling some , continue to pay the price. Yet Turkish President Recep Tayyip Erdogan is still unlikely to sign a bailout deal with the International Monetary Fund (IMF), despite the country’s need for it.That’s because Erdogan prefers quick fixes. One example of this is his recent of the lira-riyal swap line with Qatar—a temporary arrangement that boosts Turkey’s Central Bank reserves on paper—from $5 billion to $15 billion rather than negotiating what Turkey’s ailing economy desperately needs: a or an with the IMF, which would provide the country with a medium-term low-interest loan in exchange for committing to structural reforms.Many pundits in and argue the main impediment to an IMF program is Erdogan’s ideology coupled with his fear of voter backlash to such a program. They’re wrong. Rather, the obstacle for Turkey’s strongman president is IMF conditionality and its potential to undermine his hypercentralized style of governance.Within the last decade, Erdogan consolidated power with a political platform built on . Investors used to view the president’s —interest rates leading to higher inflation or an “” led by Jews aiming to tank Turkey’s economy—as embarrassing and annoying. Those days are long gone. After the Central Bank its last semblance of independence in 2019, those beliefs have become mainstream. To a large extent, they now dictate Turkey’s monetary policy, which has led to an .To make matters worse, the of the Turkish currency’s exchange rate, first at 6 and then 7 liras to the dollar, have to Central Bank reserves. Erdogan is particularly vulnerable here because those efforts were mounted by his , Finance and Treasury Minister Berat Albayrak, who should never have held the position in the first place.It is true that Erdogan has proved himself to be pragmatic before, particularly in the face of crisis. Interest rate hikes have , even when he initially opposed them. After the escalation of the , he swallowed his pride and . But these decisions did not entail a devolution of power. In fact, given his over the media,The real reason Erdogan cannot go to the IMF is that any Stand-By Arrangement or Extended Fund Facility requires structural reform and, therefore, power-sharing and good governance measures. The rule of Erdogan’s Justice and Development Party (AKP) has benefited from a lack of transparency and accountability.Turkey’s sovereign wealth fund, which acts as the Turkish president’s , is not audited by parliament or the Court of Final Accounts. One private auditor even there is not enough data to conduct a proper assessment. Economic data provided by the Turkish Statistical Institute is also suspect. A 2017 report by Germany’s second-largest lender, Commerzbank, on Turkey’s was titled, “”Canan Kaftancioglu has fueled the rise of Turkey’s increasingly effective opposition—and earned the president’s ire.Ankara’s finances were weak before the pandemic—but the combination of external debt, a public health crisis, and a president who chooses to protect his reputation rather than his people could spell disaster.The Turkish president is shutting down a university to punish former Prime Minister Ahmet Davutoglu for leaving the AKP and starting a new party, but he risks alienating precisely the voters he claims to champion.One example: the Zafer Airport in 2012 in western Turkey’s Kutahya province and run by a who has helped him acquire government media outlets. The government forecasted 7.6 million passengers during the first seven years of the airport’s operation; the airport has had just so far. Under a government-guaranteed revenue deal expiring in 2044, the company is estimated to receive 205 million euros ($228 million) from the public purse for serving nonexistent flights at an airport it built for over $55 million.An IMF program, with its accompanying reforms, would likely eliminate such outrageous revenue guarantees and countless other off-balance-sheet arrangements. It would also demand competent technocrats, transparency, accountability, independent regulatory agencies, and a Central Bank free from political pressure. But with such reforms, Erdogan would effectively be asked to forfeit control over all the shady deals he and his cronies have brokered over time. In other words, an IMF deal is a direct threat to his rule and accompanying patronage network.Turkey’s previous IMF program, which and came to head in the , brought greater transparency and accountability to the country. That package came unsustainable levels of government debt and Turkish banks’ exposure to it. The IMF called for structural reforms to strengthen public finances and fiscal transparency, and new management as a requirement for lending. It worked. Turkey stabilized, attaining an average of for the next six years.And while an IMF program could yield similar benefits for Turkey today, Erdogan is loath to submit to its conditions. The last time around, the IMF’s painful austerity measures did deliver results, but not before Devlet Bahceli, the ultranationalist partner of Turkey’s three-way coalition, forced in 2002, ousting all political parties represented in parliament, ruling and opposition alike, and vaulting Erdogan, the former mayor of Istanbul, to leadership. The same Bahceli, as now as he was back then, is Erdogan’s key coalition partner today., especially since the current Istanbul mayor, Ekrem Imamoglu—an increasingly popular figure who in uniting Turkey’s fractured opposition—has emerged to be his . Yet elections are in three years—a lifetime in Turkish politics—and Erdogan needs to keep the spoils flowing not only to the AKP’s patronage network but also to Bahceli and his clients today.It is for these reasons that the IMF will be the Turkish government’s absolute last stop. If Turkey’s economic woes and its suffering citizens somehow force Erdogan to the table, the IMF should not give him a free pass. The IMF must demand fiscal transparency, an end to off-balance-sheet arrangements, hiring of able technocrats instead of family members, and the imposition of stringent anti-corruption and anti-money-laundering measures. Turkey’s large, young, and dynamic population can be a driver of economic growth for both Europe and the Middle East. They deserve to be given that chance.Aykan Erdemir is the senior director of the Turkey program at the Foundation for Defense of Democracies and a former member of the Turkish parliament.&nbsp;Twitter:&nbsp;John A. Lechner is an analyst concentrating on the politics of Russia, Turkey, and African nations, with a special focus on conflict in the Central African Republic. Previously, he worked as part of the U.S. Commission on International Religious Freedom, a bipartisan federal government advisory body.&nbsp;Twitter:&nbsp;Canan Kaftancioglu has fueled the rise of Turkey’s increasingly effective opposition—and earned the president’s ire.Ankara’s finances were weak before the pandemic—but the combination of external debt, a public health crisis, and a president who chooses to protect his reputation rather than his people could spell disaster.The Turkish president is shutting down a university to punish former Prime Minister Ahmet Davutoglu for leaving the AKP and starting a new party, but he risks alienating precisely the voters he claims to champion.Latest12345Latest AnalysisAccording to IR textbooks, the United States, Russia, and China are on a collision course.Six months into Russia’s war, seven thinkers outline its impact on foreign policy.Misperception, sunk costs, escalation, and internationalization all make conflicts last longer than planned.Russian diplomats were once viewed with begrudging respect in the West. Now they’re seen as irrelevant mouthpieces for Putin’s war in Ukraine.LatestSign up for Morning BriefEnter your emailBy signing up, I agree to the Privacy Policy and Terms of Use and to occasionally receive special offers from Foreign Policy.By signing up, I agree to the and and to occasionally receive special offers from Foreign Policy.Expand your perspective with unlimited access.Loading graphicsComplete your profileShow moreAug 15, 2022 |In her role as administrator of the U.S. Agency for International Development, Samantha Power is often thrust into the forefront of some of the world’s biggest crises. From working to ensuAug 11, 2022 |Last summer, the United States decided to end its longest war. But just days after the U.S. military withdrew from Afghanistan, Kabul fell—and the Taliban took control of the country. Aug.Aug 09, 2022 |Want the inside scoop on Russian arms sales to Africa? 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An expert's point of view on a current event.Turkey’s economy is a dam waiting to break. The lira has lost of its value against the dollar over the last three years, while Ankara, as of last month, its net international reserves (excluding swap lines) in an of the currency. Turkey’s nonfinancial companies, already drowning in foreign exchange liabilities totaling some , continue to pay the price. Yet Turkish President Recep Tayyip Erdogan is still unlikely to sign a bailout deal with the International Monetary Fund (IMF), despite the country’s need for it.That’s because Erdogan prefers...

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Aykan Erdemir

John A. Lechner

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Why Erdogan Won’t Ask the IMF for Help

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