|
2. The positive developments reflect our continued strong policy efforts.
We have met the end-January performance criterion for the consolidated
government sector surplus, and the end-February performance criteria for
base money and net international reserves (Annex A).
We have also continued to make progress in structural areas, including
several structural benchmarks (Annex B). Moreover,
we expect to complete shortly the two prior actions for the first review,
namely passing the Law on Public Debt Management and issuing supporting
regulations, and identifying redundancies in state enterprises and eliminating
unfilled positions. The latter measures are an important part of our strategy
of pursuing state enterprise reforms aimed at increasing efficiency and
eliminating the burden imposed on employment and growth in the rest of
the economy by excess costs and staffing in the state sector.
3. On this basis, we request that the first review under the stand-by
arrangement be completed. Our targets and policies remain as set out
in the January 18 Letter of Intent. This letter updates on policy developments
and describes additional steps we plan to take to achieve the program
targets.
4. The key challenge now is to steer the right course that will allow
Turkey to realize both the 3 percent growth target and the 35 percent
inflation target set for 2002. Both targets are equally important.
An economic recovery has to take hold so that we start generating employment
again, so that hope in the future can gain momentum, and so that financial
markets evaluate positively not only short-term prospects but also the
medium-term outlook for the Turkish economy. At the same time, we must
and will use the opportunity offered by current circumstances to decisively
break inflation expectations and secure the realization of our inflation
target. The February outcome shows that we are at a turning point. Inflation
is at the root of most of the problems suffered by the otherwise very
dynamic Turkish economy. We must reduce inflation to 35 percent this year
and to single digits in the medium term. This is an essential condition
for rapid, equitable, and truly sustainable growth.
Fiscal policy and debt management
5. Our fiscal policy remains firmly geared to achieving a public
sector primary surplus of 6.5 percent of GNP in 2002. We estimate
the 2001 outcome at 5.9 percent of GNP, above the target of 5.5 percent
of GNP. Building on this strong performance, and with tax revenue exceeding
projections and spending restraint continuing in January, we comfortably
met the end-January 2002 performance criterion on the consolidated government
sector primary surplus (which is cumulative from January 1, 2001). Further,
we are close to meeting the structural benchmark on completing the remaining
measures from the fall fiscal package: most state economic enterprises
(SEEs) have approved budgets in line with cost reductions mandated, and
we have instructed the others (which had already approved their budgets
before the savings measures were defined) to correct their budgets; and
we are finalizing the identification of savings from closing regional
administrations and other line agency offices. For the latter measure,
broad budget appropriations have already been blocked, and implementation
of closures is expected by end-June. To offset the lower-than-expected
petroleum consumption tax revenue so far this year and the government's
recent decision to support job creation (through delaying half of the
increase in the social security contribution base by three months, and
introducing limited tax incentives), we are taking additional measures.
In particular, we will keep investment expenditure in one of our social
security institutions (SSK) at the level originally planned in the investment
program for 2002, which will entail a saving of TL 195 trillion,
and we will implement a generic drug purchase program in another (Emekli
Sandıgı) by end-April. In addition, we now expect a dividend
of TL 180 trillion from the state-owned Ziraat bank, whereas the budget
assumed no profit transfer from state banks this year. We are confident
that the measures we have taken will be sufficient to enable us to meet
our fiscal targets. However, should signs of deviations emerge, we will
not hesitate to take decisive and timely action to safeguard these targets.
6. We are taking further steps to strengthen government debt management.
With the re-introduction of floating rate note issues in January, the
maturity of newly auctioned debt has increased sharply. In addition, parliament
has passed the Law on Public Debt Management, and we expect and the supporting
regulations to be in place shortly. In line with international practice,
this law will establish a Treasury office covering the presently dispersed
responsibilities for formulating overall public debt strategy and assessing
risk management, and should allow closer coordination in managing the
domestic and international debt portfolios. Details on the operations
of this office will be spelled out in a government communiqué to
be issued in June. Further organizational and, if needed, legislative
improvements will be made based on the recommendations of a comprehensive
study on debt strategy and risk management, which will be undertaken by
Treasury with the contributions of external consultants and completed
by June 2002.
Monetary and exchange rate policy
7. The Central Bank of Turkey (CBT) will continue to focus its policies
on keeping inflation within the targeted 35 percent for 2002. While
ensuring that our base money and net international reserves (NIR) targets
continue to be met, we are preparing for the introduction of inflation
targeting, and expect that the pre-conditions will be met by mid-year.
8. While adhering to the floating exchange rate regime, the CBT will
use the improvement in the balance of payments and reverse currency substitution
to build up its foreign exchange reserves. As interest rates have
declined, the CBT has been in a stronger position to offset any use of
the Treasury's foreign exchange receipts for domestic payments through
money market operations, rather than foreign exchange auctions. Accordingly,
NIR is now well above the program floor. If the balance of payments were
to strengthen further, and reverse currency substitution to continue,
we would consider making foreign exchange purchases in a transparent manner
to further bolster our reserve position. We therefore expect to be able
to preserve our improved international reserve position and stay well
above the formal target. From a medium-term perspective, reserve accumulation
will enhance market confidence and enable Turkey to better withstand external
shocks. As before, discretionary intervention in the foreign exchange
market will be strictly limited, though the CBT stands ready to intervene
to dampen excessive volatility in the foreign exchange market.
9. We will take steps to develop deeper and more liquid foreign exchange
and money markets. The CBT has already announced a program to phase
out its intermediary role as a "blind broker", beginning in
March 2002, which will promote interbank markets. To encourage the development
of futures markets, the Ministry of Finance has clarified that profits
taxes will not be levied on daily mark-to-market profits, but on profits
when the contract is closed. To encourage development of the foreign currency
market, we will eliminate stamp duties on forward contracts and remove
the tax on interbank foreign exchange transactions by end-May, 2002. Also
by end-May, we will require withholding for interest earned through transactions
intermediated by Takasbank, with a view to reducing segmentation in the
interbank market. To rationalize the system of reserve requirements, the
CBT has announced, effective from May 2002, increases in (i) the scope
and length of the averaging of reserve requirements, and (ii) the remuneration
of both Turkish lira and foreign currency reserves, linking remuneration
to market rates. Remuneration will take place at less than market rates,
since these are riskless assets. Many of these initiatives have been developed
by a multi-agency working group, which will continue to identify measures
to ensure the successful development of money and foreign exchange markets.
Financial sector reform
10. Implementation of the recapitalization scheme for private banks
is proceeding as envisaged. Since the amended banking law took effect
on February 1, the Bank Regulation and Supervision Agency (BRSA) has issued
regulations and guidelines, and briefed banks and auditors about the details
of the scheme. The banks' external auditors are expected to complete the
targeted assessments of the banks' capital needs by end-March as scheduled.
The BRSA has started the selection of third-party audit firms to carry
out the second reviews, designed to verify auditor compliance with regulations
and guidelines in estimating the capital needs. We expect the BRSA to
appoint the auditing firms within a week (allowing us to meet an end-March
structural benchmark with minimal delay). To clarify the conditions for
government support, the BRSA is preparing prototype contracts to be signed
between the Saving Deposit Insurance Fund (SDIF) and the majority shareholders
on the pledging of shares, share buy-backs, and the conversion of Tier-2
capital into Tier-1 capital.
11. The operational restructuring of state banks in preparation for
privatization is also moving ahead after the passage in January of the
required legislation and decree. The Joint Board of Ziraat and Halk
has already taken the initial steps leading to the closure by mid-year
of 827 branches (458 in Ziraat and 369 in Halk): as of March 7, 119 branches
had been closed. As regards the privatization of Vakif Bank, five potential
bidders have expressed interest and are conducting due diligence. Bids
are expected in May.
12. The SDIF is committed to resolving the remaining intervened banks
and to ensuring transparency in its operations. It is taking steps
toward resolving the four intervened banks still under its ownership.
Three potential bidders are carrying out due diligence on one of them
(Toprak) and are expected to present their bids by April 9. A second bank
(Bayindir) is acting as a bridge bank, and once the resolution process
has been completed a decision will be made whether to sell or liquidate
the bank. The resolution of the remaining two banks (Taris and Türk
Ticaret) has been temporarily halted by court decisions. To promote transparency,
an auditing firm has been appointed to carry out the annual audit of the
SDIF, which we expect to be completed by end-April (meeting a structural
benchmark), by which date the SDIF will also start presenting monthly
balance sheets.
13. To complement bank rehabilitation, we are taking steps to promote
corporate debt restructuring. The voluntary market-based framework
introduced in January 2002 (the "Istanbul Approach") will facilitate
restructuring of the debts of large borrowers. In support of this, a framework
agreement to be jointly signed by the creditors and used as the basis
for the debt workouts has been finalized, but has yet to be signed. The
Production and Finance Committee, chaired by the Treasury, and with high-level
representatives from government agencies and the business and banking
communities, is meeting regularly. To accelerate the restructuring process,
we will establish a secretariat to this committee in April. The committee
will complement existing incentives by developing further measures, consistent
with preserving the transparency and integrity of the bank recapitalization
exercise, to catalyze banks' and corporates' participation in the "Istanbul
Approach". This committee will also work with the relevant government
agencies to establish by June 2002 a database to monitor corporate debt.
In addition, the SDIF has announced that a private asset management company
will be set up by end-August 2002, with the SDIF owning a minority share.
Other structural reforms
14. The government is supporting growth and the reduction of inflation
through major structural reforms. In addition to our prudent fiscal
policies, our efforts to restructure the banking system, reduce overstaffing
in the public sector, increase the role of the private sector in the economy,
and improve the business environment will promote growth and enhance price
competition. The government will also undertake reforms to de-index the
economy, and lessen inflation expectations. In the ongoing negotiations
on new two-year private sector wage contracts the government will, in
its role as an intermediary, stress to labor unions and employers the
need to reduce backward indexation. Moreover, in the first of a planned
series of meetings, the Treasury, the State Planning Organization, and
the CBT met in February with labor unions and employers' associations
to discuss wage and price policies consistent with the 35 percent inflation
target.
15. Important steps to strengthen government finances and public
sector efficiency are being taken as planned. A more efficient public
sector and a more equitable and efficient tax system are essential to
pave the way for rapid growth and new productive employment creation throughout
the economy. The steps we are taking include the following:
- To rationalize employment in the public sector, we have eliminated
all open unfilled redundant positions at state economic enterprises
(SEEs), and we have tentatively identified the number of redundant public
workers in SEEs to be in the range of 40,000-60,000 positions. By end-April
we will determine how best to meet our target of reducing the identified
redundancies by one third by end-June. In parallel, we will sharpen
the tentative estimate, based on aggregate analysis, by using company-specific
information, and will by end-May produce final estimates. Our aim remains
to reduce the redundancies by two thirds by end-October 2002 (a structural
performance criterion), and to eliminate them altogether by end-June
2003. For the central government, the Ministry of Finance and the Treasury
are in the process of completing an evaluation of redundancies, and
will by end-September 2002 formulate an action plan to address them.
The process aiming at improved public sector efficiency has been underway
since last September, and good progress has been possible through voluntary
retirement of workers receiving the severance payments they are entitled
to. We will continue with this strategy, and will rely on layoffs only
when necessary.
- The first phase of tax reform, focusing on simplifying indirect
taxation, will soon be fully in place. This phase will also include
initial steps to reduce distortions associated with the taxation of
interest income, and rationalize taxes on financial transactions. In
particular, we will reduce disparities among the withholding
tax rates on deposits. We are preparing the necessary draft legislation,
and expect parliament to adopt the legislation in April. Further steps
to rationalize the taxation of financial transactions will be taken
in the second phase of our tax reform program this fall.
- We have identified key actions to be taken during 2002 to reform
the revenue administration. By end-July, we will institute an audit
coordination unit in the Ministry of Finance, and require that it produce
a coordinated audit plan for the following year by end-November (completion
of the first such plan by November 2002 is a new structural benchmark).
By end-September, the Minister of Finance will adopt a strategy to strengthen
the collection of outstanding public sector tax arrears (a new structural
benchmark). In the budget for 2003, we will provide resources to
increase the number of auditors by 400 to move toward OECD standards
(inclusion of such resources in the draft budget submitted to parliament
is a new structural benchmark for October 17). Finally, to help
overhaul our revenue administration in the medium term, we will implement
a functional reorganization, beginning at end-June.
- To strengthen expenditure management, we have consolidated
revolving funds, reducing their number by 589, and completed our survey
of end-2001 expenditure commitments in excess of appropriations (with
these actions, we have met two structural benchmarks). To enable us
to monitor and address commitments on a regular and timely basis, we
will from now on conduct such surveys twice a year (as of end-June and
end-December), with the aim of having the results available within six
weeks after the end of each period. We have also completed all the preparatory
work to establish an independent procurement agency (an end-March structural
benchmark), and expect the board of the agency to be appointed shortly,
following the issuance of an enabling regulation.
16. As market conditions have improved, we will give privatization
new impetus. In March, we completed the second public offering of
shares in POAŞ (petroleum distribution company)on schedule, raising
US$167 million for 16.5 percent of the shares in the company. We are also
preparing for the third equity offering of TÜPRAŞ (petroleum
refinery), aiming to close this deal by end-June depending on market conditions.
We plan to offer a minimum 16 percent stake, which would bring TÜPRAŞ
under majority private ownership. In addition, restructuring and corporatization
studies regarding TEKEL's tobacco and alcohol entities and the determination
of SEKER's (sugar company) privatization strategy are underway. A privatization
plan for Türk Telekom will be adopted by the Council of Ministers
in April as planned. Following the Constitutional Court decision regarding
the pending transfer of operating rights (TOOR) contracts, we will determine
which, if any, investors are eligible for Treasury guarantees and inform
by end-June 2002 those eligible of the amendments needed to bring the
contracts in compliance with the license regulations of the Energy Market
Regulation Agency and the Electricity Markets Law. With the exception
of these eligible projects, the government will transfer all state-owned
thermal generation and electricity distribution assets under the scope
of privatization by end-July 2002. Moreover, the eligible contracts for
which the financial arrangements have not been finalized by end-January
2003 will be cancelled, and the related assets transferred under the scope
of privatization by end-February 2003. As regards pre-privatization restructuring,
the Privatization Administration has merged two maritime companies under
its portfolio and decided to merge another four companies with Sumerholding.
Moreover, one tourism company will be liquidated shortly. As a result
of these steps, we expect significant savings in operating and overhead
costs.
17. We are continuing efforts to improve the business environment.
We have prepared legislation reducing the number of documents needed to
obtain investment incentives, implemented an employee code of ethical
conduct for customs, and submitted to the Council
of Ministers legal amendments to strengthen the Turkish Patent Institute.
Also, we have started the preparation of a new Law on Foreign Direct Investment
and legal documents facilitating hiring, including of foreign personnel.
Moreover, an Investor Relations Office was set up within the Treasury
in February, and this office will open an interactive website in April.
Finally, to promote Turkey as an investment destination and learn from
international perspectives we have scheduled the inaugural meeting of
the Investor Council for July 2002. Once established, we foresee that
the Council, consisting of top-level officials of major international
corporations, will meet annually.
18. Transparency in the public sector will be improved through a
phased implementation of our action plan. On February 13, the Council
of Ministers adopted a decree spelling out an action plan to enhance transparency
and good governance. This plan is part of a broader public sector reform
effort, encompassing also public expenditure management and civil service
reform. To oversee the implementation of this plan, a Ministerial Steering
Group for public sector reform, as well as a subcommittee to provide support
to the Steering Group in implementing the action plan to enhance transparency
and good governance, will be established by end-April 2002 (a new structural
benchmark). We will accelerate the ongoing work in public administration
reform and define additional conditionality in this area in
later program reviews. In the meantime, we have defined the following
steps to improve transparency:
- publication of (i) the above-mentioned action plan to enhance transparency
and good governance, and (ii) the Report on the Observance of Standards
and Codes (ROSC) on the quality of economic data, carried out in consultation
with the IMF;
- improvement of the public sector personnel system, including passage
of legislation to establish a code of ethical conduct for civil servants
and public administrators by end-2002 (a new structural benchmark);
and
- increase in access to information, through the preparation of an Information
Act, defining the rights of citizens to request information and the
obligation of public organizations to provide information by end-2002.
19. In the context of an IMF safeguards assessment, which is required
for new Fund-supported programs, we have formulated a plan that will further
improve the transparency and effectiveness of the CBT's control, accounting,
reporting, and auditing systems. With effect from 2001 financial statements,
the CBT will publish audited financial statements consistent with IAS.
Starting with the 2002 financial statements, the CBT will clarify disclosures
of the Fund position and the relationship with the Treasury, and limit
the amount of profits available for distribution to realized profit, less
unrealized losses. The CBT will expand the role of its existing audit
committee, and from now on, when mandating an external audit firm, will
include among the duties of the external auditor to issue a report reviewing
the consistency between the program data reported to the IMF (specifically
covering base money, net international reserves, and net domestic assets)
and the audited financial statements. In this regard, by May 15, 2002
the CBT will ask the existing audit firm to prepare such a report, and
will issue it by July 15, 2002 (a new structural performance criterion).
Also by May 15, 2002, the CBT and Treasury will issue a Memorandum of
Understanding to clarify the Treasury/CBT relationship with the Fund.
Moreover, the CBT will reorganize by end-2002 the internal audit function.
To this end, it will (i) adopt a new charter, which will detail the mission,
scope, accountability, independence, responsibility, and authority of
the audit function in line with the Standards for the Professional Practice
of Internal Auditing of the Institute of Internal Auditors. The CBT will
also (ii) formulate an implementation plan identifying staffing levels,
reporting lines, scope of audits, risk assessment methodologies, and developing
an internal audit manual and training programs (measures (i) and (ii)
constitute a new structural performance criterion). For the purposes
of the safeguards assessment, an internal audit of foreign exchange management
and program data as of end-2002 will be conducted by May 15, 2003 (a new
structural benchmark).
20. Finally, we continue to receive support for the structural and
social components of our program from the World Bank.
Very truly yours,
|
/s/
Kemal Derviş
Minister of State for Economic Affairs
|
|
/s/
Süreyya Serdengeçti
Governor of the Central Bank of Turkey
|
ANNEX A
|
|
|
|
Turkey: Quantitative Performance
Criteria and Indicative Targets Relevant for the First Review
|
|
|
Ceiling/Floor |
Outcome
|
|
|
January 31, 2002
|
| |
|
|
I. Performance criteria
|
|
|
| |
|
|
|
1. Floor on the cumulative primary balance of the
consolidated government sector
(in trillions of Turkish lira)1
|
9,802
|
13,153
|
| |
|
|
| |
February 28, 2002
|
| |
|
|
2. Ceiling on contracting or guaranteeing of new
external public debt
(in millions of US$)
|
6,500
|
1,645
|
| |
|
|
|
3. Ceiling on the stock of public short-term external
debt outstanding
|
|
|
|
(in millions of US$)
|
1,000
|
0
|
| |
|
|
|
4. Floor on level of net international reserves
(in millions of US$)
|
-6,500
|
-4,907
|
| |
|
|
|
5. Ceiling on base money (in trillions of Turkish
lira)2
|
8,250
|
7,823
|
| |
|
|
|
II. Indicative targets
|
|
|
| |
January 31, 2002
|
| |
|
|
1. Floor on the cumulative overall balance of the
consolidated government sector
(in trillions of Turkish lira)
|
-32,448
|
-33,564
|
| |
|
|
| |
February 28, 2002
|
| |
|
| 2. Ceiling on the stock
of net domestic assets of the CBT2 (in
trillions of Turkish lira) |
26,100
|
24,318
|
1For January 31, 2002, the ceiling applies
to the cumulative primary expenditure of the central government since
January 1, 2001. For the other test dates, the starting date is January
1, 2002.
2Target calculated as the four working day
average of February 11-12 and March 11-12, 2002, to take account of
the transitory impact of the Bayram religious holiday on currency
demand. |
ANNEX B
| Structural Policies,
2002–04 |
|
| Action |
Type |
LOI Para1
|
Status, April 2,
2002 |
|
| Fiscal policy |
|
|
|
| 1. Implement all further
measures to reach the 6.5 percent primary surplus target that are
technically feasible to put in place in January: |
PA for SBA |
13 |
|
| (i) Council of Ministers
to approve a reduction in the share of central government tax revenues
accruing to metropolitan municipalities to 4.1 percent |
|
|
Done. |
| (ii) issue a circular to
implement attrition rules |
|
|
Done. |
| (iii) the Minister of Finance
to approve a reallocation of spending to ensure adequate funding for
DIS for agriculture |
|
|
Done. |
| 2. Increase the PCT (on
items excluding natural gas) by 1 percent in real terms in early February |
|
14 |
Not done.
Increase was equal to January WPI inflation. |
| 3. By end-March 2002, (i)
the Ministry of Finance to identify savings from closing regional
administrations and other regional line agency offices, and block
relevant budget appropriations in the budget, and (ii) SEEs to approve
budgets in line with the cost reductions mandated |
BM |
14 |
Underway.
(i) In March, savings from closing regional administrations and other
regional line agency offices were identified, and relevant budget
appropriations were blocked in the budget. A decree regarding closure
of regional administrations and other regional line agency offices
is expected to be issued shortly. (ii) Most SEEs have approved budgets
in line with cost reductions mandated, and the others have been instructed
to correct their budgets. Treasury auditors will monitor implementation.
|
| 4. Keep investment expenditure
in SSK at the level originally planned in the investment program for
2002, implement generic drug purchase program in ES by end-April,
and receive profit transfer of TL 180 trillion from Ziraat Bank |
|
5 of April 2002 LOI |
|
| 5. Refrain from introducing
any new tax exemptions or incentives, except those specified in the
tax reform plan |
|
14 |
Not fully complied
with. Payroll and personal income tax deferments were introduced
in March 2002 as part of an effort to stimulate employment. |
| 6. Refrain from introducing
any new discounts or exemptions for SEEs, except those pursued for
commercial reasons by enterprises' managements |
|
14 |
Done. The
president approved Law No:4736 on January 18, 2002 preventing any
new discounts or exemptions for SEEs. |
| Public debt management |
|
|
|
| 7. Continue to lengthen
average maturity in Treasury bill auctions and public offerings to
the extent demand allows and encourage a diverse range of investors |
|
18 |
Underway. |
| 8. Resume in January 2002
the program of FRN auctions. Before the first issue publicize a revised
standard method of price and yield calculations, in line with international
practice |
|
19 |
Done. |
| 9. Reintroduce a primary
dealer program by end-September 2002 |
BM |
19 |
Underway.
Discussions with candidate primary dealers are taking place. |
| 10. Continue to issue,
subject to market conditions, domestic FX denominated and FX indexed
bonds, as well as international bonds |
|
19 |
Underway.
Taking into account redemptions and market conditions, FX denominated
and FX indexed securities will be issued. |
| 11. The Treasury to conduct
a study of its operational mechanisms, procedures, and structure to
improve its risk and debt management, including through closer coordination
between domestic and international borrowing. The recommendations
of this study will be implemented by mid-2002 |
|
19 |
Underway.
As an interim step the new Debt Management Law calls for the establishment
of a middle office in the Treasury in charge of developing overall
debt strategy and managing risk. |
| 12. Issue in June government
communiqué that spells out details of the operations of the
middle office that will formulate overall public debt strategy |
|
6 of April 2002 LOI |
|
| 13. The Treasury to develop
its cash management operations, acting in coordination with
the CBT |
|
19 |
Underway.
The new Debt Management Law includes a clause calling for the preparation
of technical infrastructure for cash management operations in coordination
with the CBT. |
| 14. The Treasury to intensify
its dialogue with the full range of investors, including bilateral
contacts and group discussions with institutional investors and intermediaries,
and enhanced retail outreach |
|
19 |
Underway.
With the target of broadening the investor base, discussions are ongoing
on the conditions of a security which is planned to be issued for
insurance companies. A series of meetings has been started with private
banks, which will provide feedback about market developments and specific
concerns banks have. |
| Monetary and incomes
policy |
|
|
|
| 15. Ensure that any new
laws or regulations do not undermine the independence enshrined in
the CBT law |
|
21 |
Done. All
new laws and regulations are consistent with CBT independence. |
| 16. CBT to continue its
technical preparations for the introduction of inflation targeting,
including improved modeling and forecasting of inflation |
|
22 |
Underway.
Work ongoing at the CBT covers short- and near- term forecasting,
and development of the data base. |
| 17. Move to inflation targeting |
|
22 |
Preparations underway.
In addition to progress in establishing the necessary technical infrastructure
(see item 16 above), favorable developments in disinflation and inflation
expectations, fiscal policy, and the banking sector are expected to
allow the pre-conditions for formal inflation targeting to be met
by mid-2002. |
| 18. Seek a significant
reduction of the ex-post indexation element contained in current wage
contracts during the next public worker collective bargaining round
and civil service salary adjustment, and use the Economic and Social
Council as a forum for incomes policy discussions with the private
sector |
|
23 |
Underway.
An exploratory meeting between labor unions and the authorities to
achieve this goal was held in February. |
| 19. a. Consider the possibility
of reducing backward indexation of administered prices without compromising
SEEs' financial conditions |
|
23 |
Partially
done. Most SEE prices have not been changed monthly during
2002 but rather at discrete intervals in line with WPI; the exception
is energy prices which are closely tracking world market prices. |
| b. In the ongoing negotiations
on new two-year private sector wage contracts the government to stress
to labor unions and employers the need to reduce backward indexation |
|
14 of April 2002 LOI |
| 20. Encourage a successful
conclusion by end-February 2002 of banks' discussions to establish
interbank borrowing reference rates in Turkish lira out to at least
three-month maturity to enhance money market liquidity and transparency,
and to provide accurate reference rates for financial instruments |
|
25 |
Underway.
A working group established under coordination of the Banks Association
is discussing proposals, and measures are being introduced to deepen
the interbank money market. Reference rates are evolving but will
depend on increased market activity along the yield curve. |
| 21. The CBT to gradually
end its practice of acting as a blind broker during 2002 |
|
25 |
Underway.
The phasing out by end-2002 has been announced by the CBT. |
| 22. Working group to facilitate
the development of financial markets to identify concrete actions
by end-January 2002 in the areas of taxation, accounting, and regulation.
The first measures will be put in place by end-February 2002 |
|
25 |
Underway.
Interagency committee chaired by CBT with membership from Banks Association
of Turkey, BRSA, MOF and ISE, established and has held two meetings.
Taxation of revaluation profits clarified in February, and prudential
rules on market risks effective since January. |
| 23. The Privatization Agency
to authorize companies in its portfolio to transact their foreign
exchange business at the market rate (not at the CBT official rate).
The oil and gas companies (TÜPRATM and BOTATM) to work with state
banks to improve their foreign exchange practices, to minimize lumpy
transactions in the foreign exchange market |
|
25 |
Done. |
| 24. To encourage development
of the foreign currency market, eliminate stamp duties on forward
contracts and remove the tax on interbank foreign exchange transactions
by end-May 2002 |
|
9 of April 2002 LOI |
Underway.
A preliminary meeting between MoF, BRSA, CMB and CBT was held on March
26. |
| 25. Require as of end-May
withholding of interest earned through transactions intermediated
through Takasbank |
|
9 of April 2002 LOI |
|
| 26. To rationalize the
system of reserve requirements the CBT, effective from may 2002, to
(i) increase the scope and length of the averaging of reserve requirements,
and (ii) increase the remuneration of both Turkish lira and foreign
currency reserves, linking remuneration to market rates |
|
9 of April 2002 LOI |
Done. The
communiqués on required reserves and liquidity requirement
were issued in the Official Gazette on March 29, 2002, and
will be effective on date of issue starting from the tables dated
May 10, 2002. |
| 27. Multi-agency working
group to continue to identify measures to ensure the successful development
of money and foreign exchange markets |
|
9 of April 2002 LOI |
Underway.
Multi-agency working group chaired by the CBT with the participation
of Bankers' Association of Turkey, BRSA, MOF, ISE, IGE, Treasury,
and CMB has held two meetings related to the development of the derivatives
markets and TL reference rate fixing. Taxation and accounting problems
of the futures transactions have been addressed by the MOF and BRSA,
respectively. |
| Banking reform |
|
|
|
| 28. Pass necessary legal
amendments, and issue a Council of Ministers Decree for staff reductions
in state banks |
PA for SBA |
28 |
Done. |
| 29. By end-June 2002, reduce
the number of state bank branches by 800. In this context also reduce
staffing correspondingly |
PC |
28 |
Underway.
The process has been initiated, and the number of staff will be gradually
reduced by the targeted number by June 2002. |
| 30. For Vakif Bank privatization,
bids to be invited from potential investors in May |
|
28 |
Underway.
Five potential bidders have expressed interest and are conducting
due diligence; potential bidders are waiting for the audit results
being carried out under the new public support scheme. Bids are expected
in May. |
| 31. BRSA to issue guidelines
for targeted evaluations of private banks in preparation for the public
support scheme for private banks |
PA for SBA |
30 |
Done. |
| 32. The targeted evaluation
of loan portfolios, collaterals, and certain other exposures to be
performed by banks' existing external auditors to be completed by
end-March |
|
30 |
Underway. Necessary
regulations are in place in accordance with Banking Law No. 4389,
provisional Article 4. Audit process is underway. |
| 33. Third-party auditing
firms to be appointed by the BRSA by end-March 2002 to verify that
the guidelines have been followed, and to ensure the integrity of
the process |
BM |
30 |
Underway. Regulation
on third-party reviews was published in Official Gazette on March
27, 2002. Selection process of auditing firms has been initiated,
and letters for initiating third-party reviews has been sent to external
auditors. |
|
34. a. The BRSA to (i) complete the final interpretation
of the evaluations by end-April and (ii) send letters to banks stipulating
required actions on the basis of this interpretation by May 15
b. Evaluation
results to be fully incorporated into banks' end-June 2002 financial
statements
c. Banks to
apply for participation in the scheme before end-May 2002
d. Recapitalization
scheme to be completed before end-June 2002
e. The BRSA
to prepare prototype contracts to be signed between the Saving Deposit
Insurance Fund (SDIF) and the majority shareholders on the pledging
of shares, share buy-backs, and the conversion of Tier-2 capital
into Tier-1 capital
|
PA for second review (action
# (ii)) |
30, 3110 of April 2002 LOI |
|
| 35. The legal framework
and related regulations for the public support scheme for private
banks to become effective in January 2002 |
PA for SBA |
32 |
Done.
|
| 36. The BRSA to undertake
legal consultations, as necessary, to ensure implementation of the
public capital support scheme as planned |
|
32 |
Done. |
| 37. Resolve by end-2001
all banks taken over by the SDIF before November 2001, with the exception
of two banks whose resolution has been halted by courts |
PA for SBA |
33 |
Done. |
| 38. Determine final resolution
method for the medium-size bank taken over in November 2001 by February
2002 |
|
33 |
Done. The
bank was offered for sale on January 31, 2002. Three potential bidders
have expressed interest and are conducting due diligence. Bids are
due by April 9, 2002. |
| 39. The SDIF to prepare
a monthly balance sheet starting end-March 2002 and become subject
to annual external audits; the external audit for 2001 will be completed
by end-April 2002 |
BM (the latter action) |
34 |
Underway. Agreement
with audit firm has been signed. External audit will
be started in early April 2002. |
| 40. Laws and regulations
regarding loan classification, loan loss provisioning, and collateral
valuation will be amended as necessary following the portfolio reviews
by end-June 2002 |
|
35 |
Underway.
Will be done under the framework of Istanbul Approach if needed. |
| 41. Pass legal amendment
in January 2002 to eliminate with immediate effect the existing four-year
transition rule for loan loss provisioning |
PA for SBA |
35 |
Done. |
| 42. Start trial implementation
of new accounting system [for banks] in line with IAS in January 2002 |
PA for SBA |
35 |
Done. |
| 43. Following the trial
implementation the BRSA to evaluate the experience and issue by end-June
2002 a revised regulation on the new accounting standards to ensure
that banks' end-2002 balance sheets comply with IAS |
PC for end-June |
35 |
|
| 44. Improve reporting requirements
based on the findings of the independent assessments, and strictly
enforce the quality and timeliness of the reporting as of end-June
2002 |
|
35 |
|
|
45. a. Off-balance sheet repos to be included on
balance sheet as of February 1, 2002
b. Capital
charges for market risks to be calculated on a solo basis as of
January 1, 2002 and on a consolidated basis
as of July 1, 2002
c. Regulation
on monitoring of internal control and risk management systems to
become effective January 1, 2002
|
|
35
|
Done.
|
| Corporate debt restructuring |
|
|
|
| 46. Introduce in January
2002 a voluntary market-based framework (the "Istanbul Approach")
for dealing case-by-case with multicreditor exposures to large and
medium-size borrowers |
|
36 |
Underway. |
| 47. Create in early 2002
a multiagency Coordination Committee with private sector participation
under the Treasury, responsible for facilitating and monitoring the
corporate debt restructuring process, as well as identifying and proposing
the removal of impediments that may exist |
|
36; 13 of April 2002 LOI |
Not done.
Work to be carried out by the Production and Finance Committee chaired
by the Treasury. |
| 48. Establish secretariat
to the Production and Finance Committee in April |
|
13 of April 2002 LOI |
|
| 49. Production and Finance
Committee to develop further measures, consistent with preserving
the transparency and integrity of the bank recapitalization exercise,
to catalyze banks' and corporates' participation in the "Istanbul
Approach" |
|
13 of April 2002 LOI |
|
| 50. Production and Finance
Committee to work with the relevant government agencies to establish
by June 2002 a database to monitor corporate debt |
|
13 of April 2002 LOI |
Underway. The
CMB has issued the regulation on the reporting requirements. Firms
are expected to start reporting in June 2002. |
| 51. A private asset management
company will be set up by end-August 2002, with the SDIF owning a
minority share |
|
13 of April 2002 LOI |
Underway. The
authorities have requested technical assistance for drafting a proposal
for potential investors. |
| 52. The Ministry of Justice
to prepare an action plan based on the findings of a World Bank Report
on Standards and Codes (ROSC) on Turkey's insolvency regime and form
a Commission to prepare necessary amendments to the Bankruptcy Law |
|
37 |
Underway. |
| 53. Support the upgrading
administrative procedures in the judiciary to improve the capacity
of the courts |
|
37 |
|
| 54. The CMB to introduce
international accounting standards, including inflation accounting
provisions, by January 1, 2003. |
|
38 |
Underway. The
CMB has issued the regulation. Firms are taking steps to adopt the
new accounting framework. It is expected that many firms will start
accounting under the new rules in June 2002. |
| 55. Starting end-March
2002, the CMB to require corporate groups to provide consolidated
financial statements and to set up a dedicated group to monitor their
finances |
|
38 |
Underway. The
CMB has issued the regulation. |
| 56. Starting end-March
2002, the CMB to require corporate groups with financial affiliates
to provide consolidated group statements and share those statements
with the BRSA |
|
38 |
Underway. The
CMB has issued the regulation. The Accounting Standards and Corporate
Finance departments of the CMB will monitor the accounts. |
| Public sector reform |
|
|
|
| 57. Parliament to approve
Public Procurement Law in line with UN (UNCITRAL) standards in January
2002 |
PA for SBA |
40 |
Done. |
| 58. Establish an independent
procurement agency by end-March 2002 |
BM |
40 |
Underway. All
the preparatory work has been completed, and the board of the agency
will be appointed shortly, following the issuance of an enabling regulation.
|
| 59. Change laws and regulations
to make them consistent with the new public procurement framework |
|
40 |
|
| 60. Parliament to amend
the Public Procurement Law by end-May 2002, to (i) bring the
real value of the thresholds toward those in line with international
best practice and (ii) extend the minimum time period for procurement
applicable for cases below the thresholds |
PA for second review |
40 |
|
| 61. Compile a comprehensive
list of public investment projects to be phased out in time to make
decisions for the 2003 budget |
|
40 |
Underway. Rationalization
of public investment program will continue in 2003 within the framework
of a High Planning Council Decision. The Decision will be communicated
to spending agencies with 2003 Investment Circular in June 2002. Then,
the list will be compiled concurrently with 2003 investment programming
process that will be finalized by end-2002. |
| 62. Approval by Council
of Ministers in January 2002 of plan to reform the tax system |
PA for SBA |
40 |
Done. |
| 63. Enact the first phase
of the tax reform plan by end-April 2002 |
BM |
40; 15 of April 2002 LOI |
Underway.
Draft Special Consumption Tax Law (implementing indirect tax changes)
has been prepared, and the World Bank and the Fund have provided comments.
In addition, disparities among the withholding tax rates on deposits
will be reduced. |
| 64. Submit to parliament
legislation for the second phase of the tax reform plan by end-October
2002 |
BM |
40 |
Underway.
A World Bank technical assistance mission is expected in April. |
|
65. Reorganize tax administration in line with the
study carried out with the World Bank:
|
|
40 and 15 of April 2002 LOI
|
Underway.
|
| a.
By end-July, institute an audit coordination unit in the Ministry
of Finance, and require that it produce a coordinated audit plan by
end-November each year |
BM (first such plan by Nov
2002) |
| b.
By end-September, the Minister of Finance to adopt a strategy to strengthen
the collection of outstanding public sector tax arrears |
BM |
|
|
| c.
In the budget for 2003, include resources to increase the number of
auditors by 400 (for October 17) to move toward OECD standards |
BM |
|
|
| d.
To help overhaul the revenue administration in the medium term, implement
a functional reorganization, beginning at end-June |
|
|
|
| 66. Council of Ministers
to adopt a civil service reform strategy by end-2002 |
|
40 |
|
| 67. As part of the preparatory
work for item 66, by end-March 2002 establish a ministerial committee
to carry out a functional review of government, which will be completed
by end-September 2002 |
|
40 |
Underway.
A commission to coordinate necessary work will be established in line
with the CoM decision dated February 4, 2002. |
| 68. By end-September, have
in place an integrated system to monitor total general government
and SEE employment levels on a quarterly basis |
BM |
40 |
Underway.
A circular (dated December 14, 2001, No. 94997) has been sent to SEEs;
monitoring of SEE employment levels will start on a quarterly basis
as of March. |
| 69. 15,000 individuals
(public sector workers) to have been retired or notified of their
retirement by mid-January 2002 |
PA for SBA |
41 |
Done. |
70. By end-January 2002,
|
PAs for first review |
|
|
| (i) identify all redundant
workers and positions in SEEs |
|
41 |
(i-ii) Underway.
Preliminary estimates by SEE management and unions fall short
of WB estimates; work to reconcile the numbers is underway, at which
point specific redundant positions in SEEs will be identified.
. |
| (ii) sharpen tentative estimate
based on aggregate analysis, by using company-specific information
and by end-May produce final estimates |
|
15 of April 2002 LOI41 |
| (ii) eliminate all open,
unfilled redundant positions |
|
|
Done. Treasury
has sent a circular (No:4654/4655) to SEEs requesting the elimination
of 90-100 percent of their open positions. There will
be no open, unfilled redundant positions in SEEs as of end May 2002. |
| 71. Extend voluntary retirement
offers to the recently identified redundant workers in Türk Telekom
and in the Privatization Agency portfolio of companies; for those
who accept, provide payments, and allow them to retire, no later than
end-March 2002 |
|
41 |
Underway. 3,635
out of 7,477 applied have retired so far and rest were expected to
have retired by end-March 2002 for Turk Telekom. Work on assessment
of redundant workers is proceeding with the World Bank, and the retirement
offer remains open. |
| 72. Through voluntary retirement
offers, and layoffs only when necessary, reduce the number of redundant
workers by one-third by end-June, and cumulatively by two-thirds by
end-October 2002 |
PC (the Oct action) |
41 |
|
| 73. By end-June 2003, phase
out the remaining redundancies |
|
41 |
|
| 74. The Ministry of Finance
and the Treasury to formulate by end-September 2002 an action plan
to address redundancies in the central government |
|
15 of April 2002 LOI |
|
| 75. Audit SEE compliance
with this program on a quarterly basis |
|
41 |
Underway.
Treasury Controllers will be responsible for auditing. |
| 76. To strengthen the legal
framework for fiscal policy pass the Law on Public Debt Management
and issue two supporting communiqués |
PAs for the first review |
42 |
Underway.
The law has passed by parliament on March 28, and the supporting communiqués
are being prepared. |
| 77. Submit to parliament
by end-June 2002 a Law on Financial Management and Internal Control
consistent with best international practices |
BM |
42 |
Underway.
A strategy regarding the Law on Financial Management and Internal
Control has been sent to the Auditing Working Group and discussed
at a meeting on February 5, 2002. Moreover, a seminar was organized
in March to ensure consistency with EU practices. |
| 78. Close, by end-March
2002, 548 additional revolving funds |
BM |
42 |
Done. |
| 79. Incorporate in the
draft budget for 2003 the revenue and expenditures under Law 3418 |
BM for Oct 17, 2002) |
42 |
|
| 80. Eliminate the earmarking
under Law 3418 and Law 4306 |
|
42 |
|
| 81. Amend by July 2002
the governing legislation for the remaining EBFs to require passage
of their budgets by parliament, external audit of their accounts (reported
to parliament), and monthly reporting of their accounts, on a consolidated
basis, with the central government's accounts |
BM |
42 |
|
| 82. Eliminate the remaining
budgetary fund (the Support Price and Stabilization Fund) in three
years, when the World Bank's Agricultural Reform Implementation Project
ends |
|
42 |
|
| 83. In the draft 2003 budget
to be submitted to parliament (i) include net lending as an appropriation,
and (ii) extend accounting and coding reforms to all consolidated
budget agencies, and to general government units on a pilot basis
|
BMs for Oct 17, 2002) |
42 |
Underway.
To extend coding reforms to general government units on a pilot basis,
the MoF has prepared a budget implementation circular. Studies on
accounting reform are progressing as planned. |
| 84. Complete, by end-March
2002, a survey of end-2001 commitments in excess of appropriations |
BM |
42 |
Done. |
| 85. To monitor and address
[expenditure] commitments on a regular and timely basis, conduct surveys
of commitments in excess of appropriations twice a year (as of end-June
and end-December), with the aim of having the results available within
six weeks after the end of each period |
|
15 of April 2002 LOI |
|
| 86. Address the impact
of public sector retrenchment through the labor redeployment and reinsertion
program and through unemployment insurance |
|
42 |
Underway. Unemployment
insurance payments started in March 2002. |
| Enhancing the role of
the private sector |
|
|
|
| 87. The Privatization Administration
(PA) to proceed with the public offerings of POATM by end-March 2002
and the public offering of TÜPRATM by end-June 2002 and launch
the initial public offering for THY as soon as market conditions allow |
|
45 |
Underway.
The second public offering of POAS was completed in March, with a
16.5 percent stake sold to foreign and domestic investors. The third
public offering of TUPRAS shares is planned for the second quarter,
and privatization of THY still depends on market conditions. |
| 88. CoM to adopt a privatization
plan for Türk Telekom in April 2002 |
PA for the second review |
45 |
Underway.
A report of consultants to be finalized for Türk Telekom; road
map regarding the privatization strategy will be drawn up by April
2002. |
| 89. Parliamentary approval
of Tobacco Law |
PA for SBA |
45 |
Done. |
| 90. Prepare and adopt a
privatization plan for TEKEL by end-September |
PA for fourth review |
45 |
Underway.
A restructuring study is being undertaken to provide a basis for privatization
plan. |
| 91. Proceed with the privatization
of TMEKER, with the first step being the adoption of a privatization
plan by May 2002 |
|
45 |
Underway.
PA is working with other related agencies for the privatization plan
of SEKER. |
|
92. a. In the electricity sector, in January 2002,
subject to legal clarification, the Council of Ministers to adopt
a government decree annulling with immediate effect all the projects
for which transfer of operating rights (TOOR) contracts are pending
|
|
45
|
Changed. See item b.
|
| b.
Following the Constitutional Court decision regarding the pending
transfer of operating rights (TOOR) contracts, determine which, if
any, investors are eligible for Treasury guarantees and inform by
end-June 2002 those eligible of the amendments needed to bring the
contracts in compliance with the license regulations of the Energy
Market Regulation Agency and the Electricity Markets Law. With the
exception of these eligible projects, transfer all state-owned thermal
generation and electricity distribution assets under the scope of
privatization by end-July 2002. Moreover, the eligible contracts for
which the financial arrangements have not been finalized by end-January
2003 will be cancelled, and the related assets transferred under the
scope of privatization by end-February 2003 |
|
16 of April 2002 LOI |
|
| 93. By March 2002, the
Ministry of Energy to inform the PA which electricity assets will
be privatized, and by April 2002 the prequalification tenders for
the distribution companies will be launched |
|
45 |
Underway. Working
groups have finalized their reports, and the PA is ready for the privatization
of the generation and distribution assets. As soon as the distribution
regions are transferred, the pre-qualification tender will be launched. |
| 94. Complete the transfer
of gas distribution companies to the PA by March 2002 |
|
45 |
Underway.
High Planning Council Decision is about to be finalized after which
a Privatization High Council Decision will be sought. |
| 95. The PA to go forward
with the divesting of ETI Krom ATM, ETI Elektrometalurji ATM, ETI
Gümüs ATM, which are in the PA portfolio, as soon as licenses
are transferred from ETI Holdings |
|
45 |
|
| 96. The PA to continue
its divestment of ERDEMIR, and of tourism and fertilizer assets in
its portfolio. The PA also to continue divesting its portfolio of
small and medium-size companies |
|
45 |
|
| 97. Build on efforts made
in 2001 (including legal amendments and simplified procedures) to
increase the sale of government land. Initiate a study to evaluate
how the remaining obstacles to government land sales could best be
removed |
|
45 |
|
| 98. The Council of Ministers
to adopt in January 2002 follow-up actions to FIAS study to make Turkey
more attractive for domestic and foreign investors |
PA for SBA |
46 |
Done. |
| 99. Submit to the parliament
by end-May 2002 a new draft Law on Foreign Direct Investment in line
with the findings of the FIAS study |
BM |
46 |
Underway.
FIAS study is expected to be finalized in early May, and the draft
law is planned to be submitted to parliament on schedule. |
| 100. Submit to the parliament
by end-March 2002 a draft law on work permits prepared by Ministry
of Labor and Social Security, and issue a communiqué by end-April
2002 on the implementation procedures for employing foreign personnel
employed by foreign capital companies as soon as the new law is approved
by parliament |
|
46 |
Underway.
A draft law on work permits has been submitted to parliament, and
is currently with the relevant commission. |
| 101. Complete by end-February
2002 legislation reducing the number of documents needed to obtain
investment incentives |
|
46 |
Underway. MoF
(GD of Revenues) and Treasury coordinating relevant work. |
| 102. Establish and implement
by end-February 2002 an employee code of ethical conduct for proceedings
at customs |
|
46 |
Underway. A
communiqué was issued on September 11, 2001. |
| 103. Submit to the Council
of Ministers by end-January 2002 legal amendments to strengthen the
Turkish Patent Institute |
|
46 |
Underway . Draft
law has been submitted to the Prime Ministry, and is expected to be
opened to CoM signature soon. |
|
104. The Council of Ministers to adopt a strategy
by end-January 2002 for increasing transparency and combating rent-seeking
activities
|
BM
|
47
|
Done. Decree signed on February 13.
|
|
105. Define and include as program conditionality
concrete follow-up actions for the remainder of the 2002-04 program
period based on the plan in #102:
|
|
47 and 18 of April 2002 LOI
|
Done.
|
| a.
Establish by end-April 2002 a Steering Group for public sector reform,
as well as a subcommitee to provide support to the Steering Group
in implementing the plan to enhance transparency and good governance |
BM |
|
| b.
Publish (i) the above-mentioned action plan to enhance transparency
and good governance, and (ii) the Report on the Observance of Standards
and Codes (ROSC) on the quality of economic data, carried out in consultation
with the IMF |
BM |
|
Done. |
| c.
Improve the public sector personnel system, including passage of legislation
to establish a code of ethical conduct for civil servants and public
administrators by end-2002 |
|
|
|
| d.
Increase access to information, through the preparation of an Information
Act, defining the rights of citizens to request information and the
obligation of public organizations to provide information by end-2002 |
|
|
|
| 106. Establish an Investor
Relations Office by February |
|
48 |
Done. |
| 107. Establish an Investor
Council consisting of prominent business representatives from Turkey
and abroad |
|
48 |
Underway. Inaugural
meeting scheduled for July. |
| 108. Further strengthen
the efforts of the of the Treasury, the CBT, and the BRSA to explain
policies under the economic program in their respective areas, including
through the arrangement of regular (bimonthly) press conferences by
the Treasury |
|
48 |
Underway.
|
| Safeguards Assessment |
|
|
|
|
109. Follow-up measures in the context of Safeguards
Assessment:
|
|
19 of April 2002 LOI
|
|
| a. With effect from 2001
financial statements the CBT to publish audited financial statements
consistent with IAS |
|
|
|
| b. Starting with the 2002
financial statements, the CBT to clarify disclosures of the Fund position
and the relationship with the Treasury, and limit the amount of profits
available for distribution to realized profit, less unrealized losses |
|
|
|
| c. CBT to expand the role
of its existing audit committee |
|
|
Underway. The Audit
Committee will meet twice a year with the external audit firm and,
once established, with the internal audit department. It will also
review the CBT's overall risk management practices and systems of
internal control. |
| d. Include among the duties
of the external auditor to issue a report reviewing the consistency
between program data reported to the IMF (specifically covering base
money, net international reserves, and net domestic assets) and the
audited financial statements |
|
|
|
| e. By May 15, 2002 the CBT
to ask the existing audit firm to prepare such a report, to be issued
by July 15, 2002 |
PC (issuance
of report) |
|
|
|
f. By May 15, 2002, the CBT to issue a Memorandum
of Understanding to clarify the Treasury/CBT relationship with the
Fund.
|
| g. The CBT to reorganize
by end-2002 the internal audit function. To this end, it will (i)
adopt a new charter, which will detail the mission, scope, accountability,
independence, responsibility, and authority of the audit function
in line with the Standards for the Professional Practice of Internal
Auditing of the Institute of Internal Auditors, and (ii) formulate
an implementation plan identifying staffing levels, reporting lines,
scope of audits, risk assessment methodologies, and developing an
internal audit manual and training programs |
PC (measure (i) and (ii)) |
|
|
| i. Internal audit department
to conduct an audit of foreign exchange management and program data
as of end-2002 by May 15, 2003 |
BM |
|
|
1Unless otherwise noted, paragraph numbers
refer to January 18, 2002 Letter of Intent. |
|
