Turkey's financial markets face a new bout of volatility and the country's risk premium may rise after the government suspended talks with the IMF on a new deal for 10 days, analysts said on Wednesday.
Turkey has been locked in negotiations with the IMF over a major deal, which would boost investor confidence over the outlook for the lira and the country's 2009 financing shortfall, as it seeks to cope with the global financial crisis.
A new loan deal would help soothe investors as the country needs to roll over debt estimated at $100 billion and a current account deficit seen around $25 billion in 2009.
"Delaying the IMF deal means higher vulnerability for Turkey in the face of uncertainties in the current global markets and an overall higher risk premium in the currency, in equity prices, in yields, everything," said UBS bank economist Reinhard Cluse said.
Turkey's lira currency firmed 1.4 percent and the main stock exchange <.XU100> rose 2.8 percent after suspension of the talks were first announced on Monday on the hope that Turkey and the IMF would sort out disagreements and sign a deal.
Turkey's Prime Minister Tayyip Erdogan is scheduled to meet IMF First Deputy Managing Director John Lipsky on Wednesday night in Davos, IMF spokesman William Murray said.

Talks between the IMF and the Turkish government were suspended this week for 10 days in an attempt to clear remaining obstacles to a stand-by deal. The previous stand-by deal expired in May.
Economists said delaying the IMF deal might cost Turkey dearly in the form of rising borrowing costs and a new bout of lira depreciation and falling share prices, but the government fears that austerity measures imposed by the IMF will exacerbate economic slowdown and destroy more jobs.
The IMF's tight belt policies are deeply unpopular in the emerging market country.
"The risk is that Turkey assets may come under more pressure due to uncertainty over fiscal policy," said Sarah Hewin, economist in Standard Chartered Bank.
"The markets can stay calm as long as they believe that IMF money will come ultimately after March elections but it would be a problem if Turkey does not sign a deal until the end of the year," she said.
Turkey is by no means the most risky emerging market country, but it is facing more limitations than some peers which have current account surpluses or piles of foreign exchange reserves.
Several emerging markets such as Iceland, Ukraine, Pakistan and Hungary have already signed IMF deals, but the Turkish government is reluctant to make concessions on its already fixed budget targets, under which spending is raised by 15 percent in 2009.
Turkey's gross domestic product growth fell to a six-year low of 0.5 percent in the third quarter of 2008, and many economists expect the economy to shrink this year.
Fiscal matters have been an area of disagreement between the government and the IMF, government sources told Reuters earlier this week.