Treasury and Finance Minister Mehmet Şimşek said Wednesday that concerns about the continuity of Türkiye’s new economic plan were unfounded, highlighting President Recep Tayyip Erdoğan’s support for the road map.
Unveiled in early September, Türkiye’s new medium-term economic program features policies that require tighter monetary policy to rein in stubbornly high inflation, which rose to 61.5% in the 12 months to September.
Erdoğan has repeatedly expressed his support for the policy overhaul by his new economy team named after the May elections.
Şimşek is the key technocrat in the new administration that has reversed the yearslong easing cycle and aggressively lifted interest rates to conquer inflation, rebuild foreign currency reserves, and curb the chronic current account deficit.
Addressing a panel at the Future Investment Initiative (FII) in the Saudi capital, Riyadh, Şimşek on Wednesday reiterated confidence in the new economic program’s sustainability, asserting, “Concerns regarding the continuity of the program are baseless.”
He emphasized foreign investments would return, leading to real value gains in the Turkish lira.
“The new normal is to build trust with sound policies. Ultimately, this will lead to portfolio and direct capital inflows. Capital inflows will expedite the disinflation process and create real value gains in the lira,” Şimşek was quoted as saying by Bloomberg News.
He acknowledged the challenges faced in recent years under the monetary policy framework but affirmed that “we are reconstructing the policy.”
Since June, the country’s central bank hiked its key policy rate by a combined 2,150 basis points, accompanied by other macroprudential measures, such as credit tightening to cut domestic demand, the main driver of the inflation.
The bank is expected to deliver another hefty rate hike of 500 basis points on Thursday, according to surveys and analysts.
Authorities have also raised taxes to limit budget deficits, cooled domestic demand, begun rolling back a $123 billion savings scheme that sought to protect Turkish lira deposits from depreciation against foreign currencies and raised foreign exchange reserves to head off any possible current account deficit crisis.
The new economic administration has been actively engaging with investors, presenting the new economic program to reverse the long trend of foreign capital outflow. Recently, there has been a notable surge in foreign investors’ interest in the Turkish markets.
Although the heightened interest translated into a modest influx of capital, the government anticipates a gradual increase over time.
Saudi Arabia marked Şimşek last stop of his second Gulf tour since after the May elections, aimed at attracting foreign capital to bolster the country’s policy shift.
He visited United Arab Emirates and Qatar this week before arriving in Riyadh.
Şimşek also held a series of discussions in key economic hubs like the U.S., U.K., Germany and France and conducted numerous important meetings at the International Monetary Fund (IMF) and World Bank annual gatherings in Morocco two weeks ago.
The economic administration is planning an East Asia visit before the year concludes.
