Following six years of very tight fiscal policies, which contributed to the restoration of macroeconomic stability, debt sustainability and investor confidence after the 2001 crisis, Turkey is faced with a fiscal policy challenge: how to: i) preserve a rigorous fiscal policy stance; while ii) both improving the quality and cost-efficiency of key public services and developing the country’s infrastructure; and iii) simultaneously reducing the most distortive aspects of the Turkish tax system. In response to this challenge the government is trying to develop a new pro-growth fiscal strategy. As the Stand-By Arrangement with the IMF – which formed a decisive anchor for fiscal policy since 2001 – expired in mid-2008, Turkey faces the task of putting in place a suitable macroeconomic and institutional framework which would preserve the credibility gained under IMF surveillance, while delivering the needed changes in revenue and public expenditure structures.