Treasury Minister Şimşek announces public debt stock: 'Ratio to national income...'

On the occasion of the 50th anniversary of the Islamic Development Bank (IsDB), the "Governors' Dialogue-Turkey" session was held as part of the IsDB Annual Meetings in Riyadh.

Speaking at the meeting, Treasury and Finance Minister Mehmet Şimşek said that they have established a reliable fiscal framework to support the fight against inflation in Turkey and that public finances are improving despite the effects of the earthquake.

"WE NEED TIME"

Stating that the ratio of Turkey's public debt stock to national income is 29.5 percent, which is less than half the average of emerging markets, Şimşek emphasized that fiscal discipline is also one of the fundamental components of Turkey's Medium-Term Program.

Noting that Turkey also has a very comprehensive structural reform agenda, Şimşek continued his speech as follows:

"Monetary policy and fiscal policy can help you achieve the results you desire, but making them sustainable requires structural adjustment. Therefore, our structural reform program aims to increase productivity, improve competitiveness, and thus increase potential growth. As you can see, the program is quite robust, internally consistent, and reliable. There has been strong investor interest since we announced the program. The reactions from both domestic and international sources have been quite strong. This is a 2-year program. Therefore, we need time to see the full results. Initial indicators suggest that the program is working and that Turkey has what it takes to get back on a sustainable high-growth path"

WHAT DID HE SAY ABOUT THE CREDIT RATING?

Minister Şimşek stated that the program is working even though it is still in the early stages, saying, "I think we will be in a position to talk about the results around this time next year."

Stating that the current account deficit has decreased by almost half, Şimşek made the following assessments:

"The unemployment rate is at its lowest level in the last decade. We have reasonable growth, a low unemployment rate, improving public finances, and a disinflation process. The reactions to our program have been extremely positive. We received a full rating upgrade; all rating agencies have changed their outlooks regarding Turkey from negative or stable to positive. There will most likely be increases in our credit rating"

OBSTACLE IN TRADE IS AN ADVANTAGE FOR TURKEY

Pointing to the fragmentation in global trade, Şimşek said that fragmentation is a major obstacle to trade but creates an advantage for Turkey.

Explaining that supply from friendly and nearby countries has increased with the fragmentation in global trade, Şimşek said, "Nearshoring was the new normal after the global pandemic. Now, with strategic competition and trade fragmentation, friendshoring has become the new normal. When we look at both, Turkey has been one of the countries that has benefited the most from these two trends."

Minister Şimşek drew attention to Turkey's commercial relationship with the European Union (EU) based on the Customs Union; its historical, cultural, and commercial ties with the Middle East and North Africa; and its friendship with Central Asian countries, stating, "Our surroundings, which account for 70 percent of Turkey's exports, can be described as friendly and close. Therefore, we are able to benefit from the fragmentation in trade."

GREEN ENERGY IS A MUST

Touching upon the steps Turkey has taken in the green economy and energy transition, Minister Şimşek emphasized that investment in renewable energy is a necessity.

Reminding that Turkey paid 97 billion dollars for oil and natural gas imports in 2022, Şimşek said that this figure was over 70 billion dollars in 2023 and will be close to 80 billion dollars this year.

Stating that to the extent that Turkey can reduce its dependence on energy imports, it can also reduce the current account deficit, which is the main source of macro-financial instability, Şimşek stated, "Therefore, when it comes to the sustainability of the current account deficit for us, renewable energy is of key importance. It is not just renewable energy alone; we have great potential regarding the green transformation of the economy."

Mentioning that Turkey was the 4th largest tourism destination in the world last year, Şimşek said, "We are targeting 60 million tourists and 60 billion dollars in tourism revenue this year. When we look at the reservations and travel in the first 3.5 months of the year, we see that there is progress in line with our targets, and this is despite the developments in Ukraine and Gaza."

ANSWERED QUESTIONS

Answering questions after his speech, Şimşek, upon a question regarding the interest rate policies of global central banks and emerging markets, said that there are very few emerging countries that have a good story right now.

Stating that Turkey has a great story, Şimşek continued his words as follows:

"The story is the structural transformation of our country. Turkey's program is aimed at ensuring price stability, but it is not limited to that. There is also a comprehensive structural reform program. We are determined to invest in human resources, improve the investment environment, and carry out public finance reform. Digital transformation is as important as green transformation, and we will take the necessary steps regarding this twin transformation."

Emphasizing that the loosening of forward-looking policies by banks such as the US Federal Reserve (Fed) or the European Central Bank has the potential to improve financial conditions, Şimşek said that the search for yield will also strengthen when financial conditions loosen.

Noting that countries like Turkey want to attract more investment and that risk appetite is increasing, Şimşek concluded his words as follows:

"Global financial expansion also means a potentially supportive environment for global growth, and strong global growth means higher risk appetite. Therefore, high risk appetite clearly benefits emerging markets, and Turkey is one of them. We have a great story, but at the same time, the loosening of global conditions will be a tailwind for us and other emerging economies."

News Source: 12punto