IMF says Turkey loan talks called off

WASHINGTON/ISTANBUL (Reuters) - Talks between the International Monetary Fund and Turkey on a possible loan "are no longer taking place," the IMF said on Tuesday, saying economic conditions in the country had improved.

Turkey had held stop-start negotiations with the IMF ever since its last stand-by deal expired in May 2008, but as it weathered the global financial crisis and tapped credit markets without difficulty, Ankara began to suggest Turkey didn't need the money, although markets remained hopeful of a deal.

The IMF said a mission would travel to Turkey in the first half of May for annual consultations on the economy.

Asked by Reuters whether the talks would include discussions on a possible follow-up stand-by loan, an IMF spokeswoman said: "Attention has now turned to the Article IV consultation, and program discussions are no longer taking place."

The IMF added the global economic recovery had strengthened Turkey's economic outlook.

Crisis-veteran Turkey likely contracted 6.5 percent in 2009, although it is seen posting growth of 3.5 percent in 2010. It was recently rewarded with upgrades from all major credit ratings agencies on account of its resilience through the financial turmoil.

Earlier on Tuesday Turkey's Treasury said in a statement it had invited an IMF mission to Turkey for talks under Article IV -- to discuss Turkey's fiscal and monetary policies, its balance of payments, external debt developments and the impact of its policies on the growth and external accounts.

"Current developments and economic data indicate that a better performance in terms of budget deficit, public borrowing requirement, domestic rollover ratio, debt stock and other similar indicators will be realised in 2010 and onward," the Treasury said.

"Two successful stand-by arrangements were completed since 2002. Since then, the discussions with the fund were continued under a mutual goodwill and productive dialogue framework," it added.

Renewed hopes of a deal at the end of 2009 saw Turkish assets strengthen before markets pared gains on fresh doubts over the likelihood of an agreement.

Markets had hoped for cheap funding from the IMF for the fiscal policy anchor it would provide, and because it would help Ankara rein in a fiscal deficit that ballooned sharply in 2009.

A deal also was seen as a means of reducing the crowding out of the corporate sector in the loan market and a way of reducing Turkey's debt rollover ratio.

Last September the government announced a Medium-term economic program aimed at reducing the budget deficit and boosting fiscal discipline.

According to the Treasury, the IMF said the program had realistic, achievable and consistent targets, with fiscal measures which would put fiscal balances on a sound footing.