ABSTRACT
The 2000-2001 crisis in Turkey, although popularly referred to as a financial crisis, was, in fact, the fiscal crisis of the state. Economic policies, notably those adopted after 1993, led the public sector deficits to soar up and domestic debt stock to rise sharply. The constraints imposed by the external credibility of the country and the shallowness of domestic financial markets led to the process in which public sector borrowing became unsustainable. However, until 2000, political authorities refrained from taking serious measures to deal with the fiscal problems of the state and, moreover, contributed to their deterioration through a series of grave policy mistakes. An attempt to end this chaotic process in 2000, by launching an exchange-rate based stabilization program, dramatically failed and the economy went into a deep crisis. In April 2001, with the support of the IMF, an ambitious program was launched to stabilize and reform the economy to lay foundations for a new sustainable growth path for Turkey.1
