UPDATE 1-Turkey fiscal adjustment needed - IMF official

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WASHINGTON, June 18 (Reuters) - Turkey will need to make fiscal adjustments, even expenditure cuts, to put its finances on a more sustainable path over the long term, a senior International Monetary Fund official said on Thursday.

"The key question is how to keep, or bring back, the fiscal situation on a sustainable path?" Marek Belka, director for the IMF's European Department, told the German Marshall Fund in Washington.

"No matter if there is an IMF program or no program, the Turks themselves have to make the necessary adjustments, fiscal cuts if necessary or longer term reforms both on the expenditure and tax side, so that we can both agree that the fiscal situation is under control in the longer term," Belka added.

IMF officials, including IMF First Deputy Managing Director John Lipsky who is attending a business meeting there, are in Turkey and held talks with Turkish authorities on Wednesday.

Turkish markets rose on the possibility of a fresh loan agreement with the Fund. Turkish shares and the lira currency rose at the prospect of a new IMF loan agreement to succeed a $10 billion accord with the IMF that expired in May last year.

The IMF expects Turkey's economy to shrink 5.1 percent this year after posting growth of around 6 percent annually over the past several years.

"It looks like the situation in Turkey is in line with the overall economic situation (in the rest of the world)," Belka added, declining to talk about the possibility of a fresh loan accord.

"I hope that we can come to an agreement when it's possible," he said. (Reporting by Lesley Wroughton; Editing by Chizu Nomiyama)