Turkey's medium-term plan: IMF-styled economic overhaul

Turkey's medium-term plan: IMF-styled economic overhaul
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Connecting the dots between AKP's financial strategy and IMF influence.

By Alp Altinors

The Recep Tayyip Erdogan administration, led by the AKP government, has officially unveiled its three-year economic plan known as the "Medium Term Plan" (MTP). Remarkably, the MTP, personally announced by Erdogan, closely resembles an IMF program's content. Their proposed program would be similar if an agreement had been signed with the IMF.

This alignment becomes evident when considering the immediate announcement of the World Bank's $18 billion investment package right after the MTP revelation. Minister Mehmet Simsek affirmed this by describing the World Bank's announcement as "another confirmation of the MTP." The Erdogan administration is implementing an IMF-like program without IMF involvement.

The MTP involves imposing heavy taxes. The burden on the people's finances is set to increase. While the state aims for a tax revenue target of 4.2 trillion liras in 2023, this figure will skyrocket to 7.4 trillion in 2024 (a 3 trillion lira increase), 9.5 trillion in 2025, and 11.3 trillion in 2026. As our ancestors wisely said: "No sower, no reaper, no eater, common Ottoman!"

The MTP's core objective is to stifle people's income and purchasing power. Wage earners have been struck by rising inflation, and now they face another blow aimed at reducing inflation. The MTP introduces two main methods for this purpose.

First, wage increases will no longer be linked to inflation but will be based on the government's inflation target. In the past, even increases tied to inflation data from the Turkish Statistical Institute (TurkStat) resulted in significant losses for wage earners. Now, salaries will rise per the inflation target, which means much smaller increases and a more substantial loss in real income.

Secondly, credit card spending will be restricted. Card limits will be lowered, installment options will be reduced, and monthly minimum payment limits will be increased. Credit cards are a lifeline for many low-income households relying on them for essential expenses. They spend on credit and pay a fraction as the minimum payment, resulting in substantial interest costs. In the new era, both wages and card spending will be curtailed, reducing purchasing power and demand. While industrialists and bankers continue to enjoy hefty profits, wages will be suppressed, and state spending, which has surged over the past five years, will not be reduced, perpetuating the trend of an "expensive state."

The MTP aims to shift the focus from domestic consumption to the export of manufactured goods, potentially attracting foreign investment. In essence, it is a privatization program, with the government targeting the sale of public assets. The plan is to privatize 12 trillion liras in 2023, with even higher targets of 25 trillion in 2024, 30 trillion in 2025, and 35 trillion in 2026. The specific public assets to be sold have yet to be disclosed.

The MTP includes reduced severance pay, a key benefit for the working class. It envisions cutting the number of days of severance pay from 30 to 15-20 and linking the return of compensation to financial funds. Transferring severance pay to a fund, thereby reducing the burden on employers, aligns with previous IMF demands for Turkey.

In summary, the MTP is an anti-labor program crafted by the Erdogan-AKP government in alignment with the interests of both international and domestic capital monopolies. It portends an escalation of the class struggle between labor and capital in the coming three years.

Alp Altinors: Translator, writer, political economist, thinker. He translates from English, Spanish and Russian and conducts research in these languages. He is the author of "Impossible Capital - Capitalism, Socialism and Society in the 21st Century". He has published numerous articles and translations in the fields of international political economy, international relations, philology and history on the history of the USSR, the People's Republic of China and the Ottoman Empire, the problems of socialism and 19th century Russian literature. He graduated from TED Ankara College High School and Eskisehir Anadolu University Faculty of Economics. In 2008, he was the coordinator of Nazım Hikmet Marxist Academy of Sciences in Istanbul and gave lectures on political economy. He was a member of the HDP Central Executive Committee between 2014 and 2016.