Turkey disagrees with IMF on spending: deputy PM

By Hatice Aydogdu

MARDIN, Turkey (Reuters) - A new loan deal between Turkey and the International Monetary Fund is in doubt because of a disagreement over the level of spending by municipalities, Deputy Prime Minister Nazim Ekren said on Saturday.

The IMF and Turkey are expected to hold further talks during a summit of G20 industrial and developing nations in Washington on November 15. These will cover details of Turkey's follow-up deal with the Fund after a previous agreement expired earlier this year, Ekren told reporters.

"It is not very easy to say whether there will be an agreement with the IMF or not," Ekren said.

Ekren, who supervises economic coordination, also said Turkey had sufficient foreign exchange reserves for its banks to roll over their debt.

"It looks that the banks can roll over 50-65 percent of their debt. There is no possibility that we fail to overcome this with the level of foreign exchange we have," Ekren said.

Turkey's $10 billion IMF stand-by deal expired in May and Prime Minister Tayyip Erdogan has said the government does not want to sign a new loan accord if the IMF programme exerted excessive constraints on budget spending, taxes, economic growth and public investments.

An IMF team visited Turkey last month after talks on the economy and a possible new agreement. Turkey's business community has been calling for another loan deal -- most likely a precautionary stand-by agreement -- to help to limit the fallout from the global financial crisis that has forced Ukraine, Hungary, Iceland and Serbia to seek IMF financial aid.

There is no disagreement between the IMF and Turkey on the level of public investments and a government decision to cut a social security premium paid by employers by 5 percentage points, Ekren said.

But he added: "There is disagreement with the IMF on the level of funds to be transferred from the central government to local administrations."

Turkey will hold local elections next March and the IMF warned the authorities against increased spending for municipalities as Turkey's financial markets have been hit severely by the global financial markets.

Turkey's foreign exchange reserves stand at $72 billion, the latest data shows.

Ekren also said that the Turkish government was keeping its 4 percent economic growth goal for next year. The economy expanded 1.9 percent year-on-year in the second quarter, a sharp slowdown from 6.7 percent in the first quarter, and some economists expect it will grow only 2-3 percent next year.

(Editing by David Stamp; editing by David Stamp)