ISTANBUL – The government of Prime Minister Recep Tayyip Erdogan has blocked the public release of the International Monetary Fund's latest report on Turkey. The IMF allows individual governments the right to deny permission to publish a country report if they so choose, though this right is rarely exercised.

So what should we make of the Turkish government preventing the latest report from going public? "Smart governments' seldom exercise this right, which amounts to rejecting transparency. They generally choose to go public with a report even if it is not in their favor because they know that not publishing it will have much greater consequences.

So, does the IMF report contain shocking developments we don't yet know about? Personally, I think it is unlikely that the report contains any criticism we haven't heard or talked about. In all likelihood it mentions the current economic imbalances and weaknesses. These are obvious to everyone.

Bit if there isn't much that is new, whey then would Deputy Prime Minister Ali Babacan and his team have taken such a drastic decision?

What they fear is that, should the report be made public, it will make international investors skittish and put a short-term end to the inflow of foreign capital. This seems to me proof that they do not want to hurt the flow of liquid cash into the country ahead of elections on June 12; hence the nominal measures they have forced the Central Bank to adopt against the current account deficit and inflow of foreign cash.

So, why are exchange rates rising? This is the point that they are missing. Of course there are factors like global economical imbalances, an insufficient increase in production and the ongoing crisis in Greece. But even so, Turkey has been on a negative track for the past month compared to other developing countries.

The foreign capital flow into Turkey has been decreasing in recent months. The reason for this is a growing perception of the risk inherent to the Turkish economy. Earlier expectations that Turkey's economic rating would go up after elections have begun to be replaced by worries that just the opposite could happen.

Clues in the JP Morgan report

So, why did they stop the IMF report from coming out? Herein lies the real amateurishness. Just as with other countries, the IMF likes to see its country reports published and to let investors know about any risks it might see. This has always been the case. The IMF also disapproves of governments that block publication.

Do not imagine that in a situation like this, the IMF simply sits back and keeps quiet. Instead, when asked, it will continue to inform investors curious about risks in Turkey's economic situation.

Just to remind anyone who might launch into a conspiracy theory at this point: the IMF doesn't follow this procedure just for Turkey, but for all countries as part of its international mandate. The IMF's influence over international banks and brokerages is also no secret.

Seen from another perspective, this is the kind of professionalism the IMF expects. If the present Turkish government were made up of professional leaders instead of a bureaucracy of devoted ideological believers, they would understand this attitude.

In sum, this is also the context we can use to view last week's JP Morgan report advising investors to reduce the weight of Turkish holdings in their portfolios. "In Turkey, high inflation, deteriorating current account deficit and relatively complacent policy worries us. The hikes in reserve ratio requirements (RRRs) have cut consensus earnings forecasts for banks," said JPMorgan.

Are these lies? Do we not face mounting risk? Aren't we expecting hard times after the election? Even if the government blocks publication of the IMF report, they cannot prevent the truth from getting out.

photo - John Walker