Turkish government plans to increase investment incentives to poor regions could jeopardise budget targets, including the key primary surplus, the International Monetary Fund warned on Wednesday. The plan could block Turkey's new $10 billion loan agreement from being approved by the IMF's board, IMF officials have said. Under the plan, the government will increase the number of poor provinces that get investment support through tax, social security and energy incentives.

But IMF spokesman Thomas Dawson said the move put at risk both the government's primary surplus target of 6.5 percent of gross domestic product and the cap on the social security deficit at 4.5 percent of GDP.

"We're looking to the authorities to take high-quality fiscal measures so that these targets can be achieved, which is necessary for the new program to take effect," Dawson told a regular press briefing. He said the IMF believed the plan, which would increase the incentives to 49 provinces from 36, would be costly.

"This is a source of concern to us since we think that it would increase distortions, weaken the social security system and have a significant fiscal cost," Dawson said.

Copyright Reuters, 2005