The PKK terrorist group's decision to disband will open the door to greater political stability and enable Türkiye to concentrate on economic growth and reforms, while shifting resources from security efforts to development, Treasury and Finance Minister Mehmet Şimşek said on Wednesday.
The group announced on Monday it would lay down arms and dissolve itself, which will eventually mark an end to decades of violence that killed thousands in Türkiye and cost what Şimşek said is estimated to be about $1.8 trillion in counterterrorism efforts.
The decision promises to boost NATO member Türkiye's stability and revitalize long-stalled economic potential in the country's eastern and southeastern regions, which have been heavily affected by the PKK attacks.
The move, which Şimşek said is a positive development for Türkiye's credit rating, is also said to eventually lower risk perceptions and help redirect state spending from security to growth.
Türkiye's almost five decades of fight against the PKK "cost us about $1.8 trillion," Şimşek told a panel on the sidelines of the European Bank for Reconstruction and Development’s (EBRD) annual meetings in London, citing a study.
"We will no longer be wasting our energy and resources on combating terror. We will spend our energy and money on rebuilding the eastern and southeastern regions of Türkiye, where demographic structure is highly favorable; it will become the new engine of Türkiye's growth," he said.
Also speaking on Wednesday, President Recep Tayyip Erdoğan said Türkiye was on the brink of a new stage, acknowledging that terrorism had "not only hurt our nation's people" but has also "dealt a severe blow to our economy."
"Trillions of dollars, which should have been used for the welfare of Turkish citizens, have instead been spent directly on counterterrorism efforts or indirectly on addressing the economic and social problems caused by terrorism," Erdoğan told a parliamentary group meeting of his Justice and Development Party (AK Party).
The president stressed what he said was a fact that Türkiye had lost time clearing the mines laid along its path, while some countries in its league had risen to the top of the development rankings.
Erdoğan called on international entrepreneurs to invest in the economically untapped regions with a "win-win approach."
"We will encourage and support the construction of new facilities across all industrial sectors in the region," he said.
"A new era awaits us in southeastern Türkiye, not only in terms of security and peace but also in tourism, culture, investments, and social harmony."
Şimşke said the PKK's dissolution would pave the way for political stability and enable Türkiye to focus on growth and reforms and help it channel its energy toward economic development.
He added that peace and stability would also support regional recovery.
"It will help us uplift the entire region, including Syria and Iraq. Everyone will benefit from peace and stability, because it is the only path to prosperity," he said.
"And also, it will help Türkiye's democratic journey and help improve Türkiye's perception."
According to Şimşek, geopolitical risks have long been factors that constrain growth, but in the future, these risks could also turn into opportunities for Türkiye.
"Lasting peace in Ukraine and Syria could pave the way for regional stability. In a fragmented global landscape, the only antidote is regional integration," he added.
He also noted that Türkiye has significant potential for progress in its relations with the West.
"A rapprochement with the U.S. and deeper integration with the EU could open the path before Türkiye."
Şimşek went on to say that the country's economic transformation was on track and that the country was prepared to deal with slower growth.
Tighter financial conditions, lower oil prices and a weaker dollar were likely to be disinflationary, boosting the economy, he added.
"Growth is slower, but we can live with that," he stressed.
Şimşek, since his 2023 appointment, and the central bank had helped the country lure more investors, boost reserves and temper inflation by engineering a return to more conventional economic policies.
Annual inflation slowed to 37.9% in April, the lowest level since December 2021, according to official data. Yet, the monthly growth rate in prices climbed to 3%, partly due to a depreciation in the value of the Turkish lira following the arrest of Istanbul Mayor Ekrem Imamoğlu and uncertainty about U.S. tariffs.
Imamoğlu was jailed in late March on corruption charges pending a trial. That sent the lira and Turkish assets sharply lower before authorities acted to stabilize the markets, which eventually pushed the central bank into a surprise interest rate hike in April.
Its 350-basis-point interest rate hike lifted its benchmark one-week repo rate to 46%, boosted Turkish assets and signaled a renewed commitment to tackling inflation.
Before that, the bank had gradually cut its benchmark one-week repo rate in December and lowered it to 42.5% in early March as inflation eased.
Şimşek said recent turbulence had raised some concerns, but the decline in oil prices is supporting the disinflation process.
The economic transformation program is "on track, it is working, it is delivering," he noted.
While revenue could underperform, continued fiscal consolidation could keep the current account deficit below the current 2% expectation, he said.
