to 54 % in 1998. as of august 1999, the wpi - based inflation rate stood at 54 % despite an unexpected change in the price of oil and a relative loosening of the fiscal stance in the first half of the year. since turkey has a long history of inflation, inertia has played an important role in determining inflation. breaking down this “ inflation resistance ” of the economy requires a high level of commitment on the part of the political authorities. one sign of this commitment may be their performance in the area of structural reforms. there is no doubt that the more successful the realization of the reforms, the stronger will be the credibility of the program. now let me turn to these reform issues. turkey has a good record for structural issues. we have liberalized the trade and capital accounts of the balance of payments for about two decades. we have a flexible labor market. high domestic savings is one of the main characteristics of the economy. market oriented economy is another aspect of the structural component of turkey. right now, turkey has four important structural reforms on its agenda, not only as a part of the disinflation effort but also because they are essential for changing the environment. thus, these structural reforms are vital for adapting to the changing global environment. they consist of reforming the banking sector, the social security system, agricultural subsidies, and privatization. some of these reforms have already been approved by parliament, and the others are in the pipeline. the new banking act which was approved by parliament in june has the following four general objectives : • to close the legal loopholes ; • to implement the international supervisory regulations ; • to assign the supervision of banking organizations to an independent agency ; and • to make some adjustments regarding the process of founding and operating banks. in particular, the twenty - five core principles for effective banking supervision drawn up by the bank for international settlements in 1997 have been endorsed in the amendments to the banking act. as a result, the amendments are consistent with modern principles of effective banking supervision. i believe this new law will rapidly improve the soundness of turkey ’ s banking system, which is crucial for the conduct of monetary policy. just as the monetary authorities cannot achieve medium - term price stability without appropriate fiscal policies, they cannot pursue a price stability target without a sound banking system. the banking law approved by parliament was a big step forward, but further action is also needed. one important additional issue is to restructure the state banks and reduce their role in the banking

recent effort, to build a macroeconomic infrastructure suitable for membership in the global economy, where low inflation and a sustainable growth rate, combined with sound and well functioning financial and real sectors, are the minimum standards. the last but by no means the least point i would like to make is that we now have an occasion for showing, once more, the ability of the turkish economy to overcome adversity by meeting the challenge to our resilience following a major earthquake. during the last two years, we have survived the south asian, russian and latin american crises, and also an economic slowdown in the eu region that is an extremely vital trading, financial and economic partner for turkey. we also had the uncertainties preceding the early election held in april 1999, which tested the resistance of the turkish economy. i truly believe that we have already passed these exams, and also that we have gained enormous experience. i have always said that we are extremely good in bad times, although we don ’ t like them. this time the situation and prospects are different, and we will show the abilities of the turkish economy in good times as well as bad. if the program we have begun implementing is successful, that success will affect at least the next 50 years of turkey ’ s economic and social life. i believe these messages are clear and will be well understood by our international partners.