Simsek announces Turkey’s plans to boost revenue outside of budget including privatization

Turkey's Finance Minister Mehmet Simsek said on Monday that Turkey's government would seek further revenues outside the budget, including from privatisation, and that quantative tightening will be carried out if necessary.

In an interview with Turkish broadcaster NTV, Simsek said consistent domestic consumption and credit growth was needed to lower inflation to single digits, as is targeted in the country's medium-term programme.

Simsek delineated the prime objectives of the Medium-Term Program (OVP), including stabilising inflation, maintaining fiscal discipline, and implementing structural reforms.

Minister Simsek reflected on the current state of the global economy, noting that growth has been relatively slow, hovering around an average of 3%. He attributed several factors to this trend including the after-effects of the pandemic which have propelled a rise in inflation. "We are currently experiencing a period where global financial conditions are notably tight," said Simsek.

As Turkey grapples with significant macroeconomic challenges, the OVP is laying down a strategy focused on three key components to mitigate these concerns. First and foremost, the program aims to bring inflation back to a single-digit figure, aiming to achieve this goal within a span of three years. "This is a difficult process, but feasible. We have succeeded in the past, we will succeed again," affirmed Simsek.

The second crucial aspect of the program focuses on maintaining fiscal discipline, a strong suit of previous AKP governments, which have effectively utilized fiscal policy as a stabilizing anchor. Despite certain disturbances in the budget due to factors such as the recent earthquake and past decisions, the objective is to reduce the budget deficit to below 3%, excluding earthquake-related expenses.

Lastly, the OVP envisages structural reforms aimed at enhancing Turkey's competitive edge and promoting growth through increased productivity. This encompasses investments in productive sectors and a concerted effort to foster the efficient utilization of existing resources.

Drawing attention to the volatility in global oil prices, which surged from 70-80 dollars per barrel to over 90 dollars recently, Simsek disclosed that from December 2021 to May 2023, the foreign exchange rate was maintained at a certain level. "We have released the rate to float freely. Of course, there is the impact of the exchange rate, a constantly changing factor. The pass-through will decrease over time," he explained.

Highlighting a significant spike in the annual credit volume through credit cards, amounting to an increase of about 140% as of September 1, Simsek pointed out the difficulties in controlling inflation and the current deficit with such a high credit volume. He indicated a restrictive perspective towards vehicle loans and mentioned that while there will be no changes regarding credits for first homes, credits for secondary and subsequent properties will not be supported.