Şimşek stated that the Medium Term Program (MTP) has three basic components: fight against inflation, fiscal discipline and structural reform.
"We have put forward a program framework that will bring inflation back to reasonable levels, to single digits. We will see the results of this much stronger after the transition period. Our goal is to reduce inflation to single digits again by the end of 2026," Şimşek said.
Stating that they aim to reduce the ratio of budget deficit to national income below 3 percent, excluding earthquake expenses, Şimşek explained that they see the external resources leg as the fourth element of the program.
“WE RELEASED THE DOLLAR RATE”
Stating that he respected the ambitious inflation targets in the MTP, Şimşek continued his words as follows:
"We tried to present the most realistic figures as possible. My impression is that, in general, the goals and macro indicators of the program are realistic. Inflation forecast changes are changes that occur as a result of our better understanding of the picture. The exchange rate was kept for a long time, and the exchange rate was kept at a certain level between December 2021 and May 2023. We released the dry. While talking about rational policies on the one hand, it is not right to intervene in the exchange rate on the other. There is an exchange rate effect. The pass-through from exchange rate to inflation has been high in recent months, and this will decrease."
11.5 BILLION DOLLARS BONDS ISSUANCE TO UAE
"The United Arab Emirates (UAE) showed great interest and announced a program worth nearly 51 billion dollars. An important component of this program is to heal earthquake wounds, and a bond issuance of $8.5 billion is on the agenda. I believe that a bond issue worth $8.5 billion will take place before the end of this year. We will also issue bonds worth $3 billion to finance exports. The total bond issuance of $11.5 billion will probably be completed this year," Şimşek stated.
SUPPORT TO TURKEY FROM THE WORLD BANK!
Şimşek continued as follows:
"We had a long meeting with the President of the World Bank together with our Central Bank President. We told them about our program. They also said that they would allocate an additional $18 billion in addition to the current $17 billion planning to support our program. A total of 35 billion dollars of World Bank package will be presented to Turkey."
“THE PERIOD OF WEAK EXCHANGE AND HIGH INFLATION WILL BE LEFT BEHIND”
Şimşek, on questions regarding the exchange rate, "We do not have an exchange rate target, we never have. Actually, it shouldn't be a guess," he said.
Stating that they foresee the period until next June as a transition period, Şimşek said, "It will be very different after June, especially in terms of fund flow. We cannot have an exchange rate prediction or target, we base it on what is in the market. The vicious circle we have observed in recent years will end, namely 'exchange rate, inflation and high pass-through'... Domestic demand will be rebalanced next year. We will limit domestic demand, especially in terms of excessive consumption. We will keep credit expansion parallel to the inflation target. We will limit monetary expansion through credit. This will reduce the current account deficit. We have introduced some regulations on gold imports, and gold demand will also weaken. Monetary policy will become more effective. On the one hand, monetary policy, on the other hand, gold import measures, but most importantly, the global background will become supportive. The period of weak exchange rates and high inflation will probably be left behind. We believe in this, we will achieve it."
“WE WILL MAKE TAX REFORMS”
Pointing out that earthquake expenditures will not be permanent, Şimşek said, "We will show serious performance in the collections phase until the end of the year. So is the control leg. Soon, I will give specific targets to our treasurers and tax office heads, all of them."
Şimşek stated that efforts should be made on the revenue side and that they will focus more on these issues and make tax reforms next year.
"Just as we are determined about inflation, we are also determined to re-diagnose budget discipline. We will also seek income outside the budget," Şimşek added.
LIMITATIONS TO CREDITS
When asked about the regulation regarding credit card use, Şimşek said that the reasonableness of credit expansion is very valuable for the programs. Pointing out that the annual credit card loan volume increased by around 140 percent as of September, Şimşek said, "More than double inflation. You cannot control inflation and current account deficit with such a high credit volume. We have a limiting perspective on vehicle loans. We will not make any changes regarding lending for first homes. In other words, we support our citizens to purchase a home for their first home. However, if the citizen has the means to buy a second, third home or holiday destination, he can buy it, but we will not support this with a loan. We will severely limit credit in these areas, both in terms of pricing and quantity. We have increased the risk weight of such loans in banks and will continue to do so. We will price more accurately. If necessary, we will impose quantitative restrictions because we need to control the current account deficit and reduce inflation."