Treasury and Finance Minister Mehmet Şimşek on Monday said Türkiye aims to reach a status where it repays more external debt than it borrows from foreign creditors, and seeks to rely more on domestic borrowing as of next year.
"From next year onward, we aim to be a net external debt payer and place more emphasis on domestic borrowing," Şimşek told at an emerging market economies conference co-hosted by the International Monetary Fund (IMF) in Saudi Arabia.
Focusing more on domestic borrowing indicates a shift toward raising funds internally, which can provide more control over financial conditions and reduce exposure to international financial volatility and high costs.
Şimşek also highlighted the challenges of reducing inflation and restoring fiscal discipline, stressing that these difficulties are largely local in origin.
"Inflation is falling; it is still high, but it is falling," Şimşek said.
Annual inflation, which peaked above 75% last May, fell to 42.12% in January. Monthly inflation climbed more than expected to 5.03% due to a minimum wage hike and several new-year price revisions.
Şimşek pointed out that the process of disinflation would continue, calling it the key to further improvements in expectations.
As inflation eased, the Central Bank of the Republic of Türkiye (CBRT) has been gradually cutting rates since December, reducing the policy rate by 250 basis points each in December and January.
At the same conference, CBRT Governor Fatih Karahan on Monday said the bank stands "ready to act" against risks in the rate-cutting cycle.
Earlier this month, Karahan said the bank is "not on autopilot" after two straight rate cuts, and can pause or change the size of policy rate moves based on data.
The policy rate, which, prior to December, the bank had held steady at 50% for the preceding eight months, now stands at 45%. It is expected to be lowered to 30% by the end of the year, according to surveys.
The bank foresees inflation dropping to 24% by year-end, according to its latest estimates, announced earlier this month.
Şimşek underscored that Türkiye had spent approximately $74 billion on earthquake reconstruction over the past two years, equivalent to more than 6% of its gross domestic product (GDP).
Consequently, the budget deficit to GDP ratio has been around 5% in recent years, which marks a high figure in Türkiye standards.
"We aim to reduce this to around 3% this year," said Şimşek.
He went on to stress the adverse effects of a strong dollar and high long-term U.S. Treasury yields on emerging markets.
Karahan also pointed to global risks that he said were adding to uncertainty in the market.
He said uncertainties over monetary policy in the advanced economies – the United States in particular – are creating risks for emerging market economies, including Türkiye.
"That means that the central banks will need to walk very carefully," he said. "Risks are there for a lot of reasons ... and we stand ready to act," he noted.
Şimşek mentioned that Türkiye managed to reduce its current account deficit to around 0.7% of GDP last year. "It may expand a bit this year but will remain manageable," he added.
The minister expressed hope in attracting considerable foreign direct investment (FDI), noting that such inflows do not generate debt.
"With inflation and additional progress on the fiscal side, we want to see if we can encourage maturity extension in portfolio investors," Şimşek added.
