Finance and Finance Minister Mehmet Şimşek delivered a lecture on the 2025 Budget of the Finance and Finance Ministry at the General Assembly of the Turkish Grand National Assembly.
Stating that there has been significant progress thanks to the medium-term program that they have implemented since the second half of 2023, Şimşek said that they have primarily strengthened macro-financial stability. Stating that they have achieved a rebalancing of the economy and increased resilience to shocks, Şimşek said it is valuable that the ratio of the current account deficit to national income has decreased from 5.5 percent to less than 1 percent.
Minister Şimşek emphasized that by increasing reserves, the low level of reserves is no longer a cause for concern and that their claims that this was “achieved through carry trade” are not true and that more than two-thirds of the increase is due to long-term, affordable external resources and portfolio preferences in Turkey.
Emphasizing that the country risk premium has fallen by more than 450 basis points in the past 1.5 years, Şimşek said that the decline in the risk premium in developing countries in the same period accounted for a tenth of that, saying, “If there is no If the program is not implemented successfully how can the country's risk premium differ from that of comparable countries? “We have to ask ourselves why it has fallen more than tenfold over the same period,” he said.
Stating that Turkey's external resource costs have decreased by 30 percent, Şimşek pointed out that the real sector and banks have access to financing on much more favorable terms. Stating that they have gained confidence in the Turkish lira, Şimşek explained that the share of the Turkish lira in total deposits, which fell to 36 percent before the program, has exceeded 57 percent.
“There will be no loss from the current KKM invoices in 2024”
Minister of Finance and Finance Şimşek responded to the criticism of the Exchange Rate Protected Deposits (KKM): “KKM has fallen continuously for 68 weeks. KKM shares peaked at 3.4 trillion lira last year, and by 2024 it has fallen below 1.2 trillion lira. The average deposit interest rate is 54.6 percent, but the increase in the exchange rate is not even half, so there will be no loss on current KKM accounts in 2024. “It's out of the question.” he said.
Explaining that one element of the program is to restore strong financial discipline, Şimşek said that despite the earthquake costs, they have brought the budget deficit under control and started to reduce it.
Elaborating on the objectives of the program, Şimşek pointed out that Turkey is the only country in the world whose rating was increased by two notches by the world's three major rating agencies this year.
Pointing out that they closely followed developments in the global economy during the implementation of the program, Şimşek said, “Global conditions were difficult at the beginning of the program. Because global interest rates have been high last year. “However, in 2025, global conditions for the program became significantly more favorable.” With the growth performance of our trading partners expected to improve in 2025, the central banks of developed and developing countries have begun who If it wants to cut interest rates this year, it will continue to cut interest rates in the coming period, which means that global financial conditions will improve. “Commodity prices are expected to remain low. All of this is positive for the program.” gave his assessment.
“We have created the necessary conditions to permanently reduce inflation”
Stating that the AK Party governments led by President Recep Tayyip Erdoğan have always worked with the aim of building a more prosperous Türkiye, Şimşek continued with his words as follows:
“With the measures we took to address macroeconomic imbalances, domestic demand slowed in 2024 and the economy began to return to balance. The growth of the disinflation process is in line with our forecasts. It has slowed down in the short term. However, this is only temporary.” It would not be enough to comment on the general economic development with regard to the limited decline in industrial production, because the economy is in decline.” The remaining approximately 79 percent will continue to grow due to disinflation as well as next year With more favorable global conditions, this will have a positive impact on economic activity. We expect it will have an impact.”
Emphasizing that thanks to the measures they implemented, inflation fell by 28 points compared to the peak in May this year, Şimşek said:
“Inflation remains high in services that respond later to disinflationary measures and have retroactive prices. May our citizens be of good cheer. A noticeable slowdown in inflation has begun in many areas, from food to durable goods, from education to transportation. It will continue.” In 2025, we will have created the necessary conditions to permanently reduce inflation. The reason for this is that inflation will continue to fall in 2025. First, the lagged effect of monetary policy becomes more evident on the fiscal deficit. “We will ensure that public finances provide greater support to the fight against inflation. Thirdly, we will set some managed and guided prices within budgetary possibilities in line with the inflation target. Finally, we will accelerate projects and reforms that will lead to increased supplies in basic areas such as nutrition, housing and energy.”
“We want to strengthen tax justice”
Finance and Finance Minister Şimşek stated that the current account deficit, which was about $56 billion, has decreased to about $8 billion today and that structural reforms should be accelerated to make the decline in the current account deficit permanent.
Stating that they have taken measures to ensure spending discipline in the public sector, Şimşek said, “We have made a very comprehensive revision of the Public Procurement Law and forwarded the draft to our party's officials,” he said.
Şimşek emphasized that Turkey is the sixth largest country with the lowest public debt among 60 developed and developing countries, according to the International Finance Institute, and that it borrowed mainly in Turkish lira to reduce exchange rate risk. They reduced the refinancing risk of the stock by they extended the term of the debt. He stated that they limited the amount of variable rate borrowing and maintained strong cash reserves to reduce interest rate risk.
Şimşek emphasized that they aim to strengthen tax justice and elaborated on tax regulations. Pointing out that they use tax incentives as an effective policy tool to support economic, social and environmental goals, especially tax justice, Şimşek said that they provide tax incentives for investment, production, research and development and export activities that increase the growth potential of the country Increase Turkey and contribute to employment.
Stating that the claims that “tax expenditure is only provided to the capital sector” are not true, Şimşek said: “Do you know what the largest item of tax expenditure is? The cost of not collecting taxes from the minimum wage in 2025 will be 853 billion lira. Almost a third of all tax expenditure. We expect tax spending of 683 billion lira for development activities and investments that create jobs. he said.
Simşek informed about the audits carried out as part of the fight against informality and pointed out that the claims about the repayment of tax debts were not true. Şimşek said: “Demands can only be deleted with the legal regulation of our parliament.”
“With improvements in salaries and wages, the increase was above inflation.”
Emphasizing that they always stand on the side of workers and pensioners, Minister Şimşek said that there have been improvements in salaries and wages and that the increase was above the inflation rate. Citing examples of this, Şimşek said: “We have not and will not let our employees and pensioners be crushed by inflation. Our goal in this program is in that direction, it hasn't changed. Inflation is currently at 47 percent, it will probably be 45 percent. percent by the end of the year The lowest salary increase for civil servants is 78 percent. “The minimum pension has increased by 68 percent, and the minimum wage is expected to be above inflation.” has given his assessments.
Stating that students, youth, disabled people, adults over 65 years old, farmers, tradespeople, artisans, white-collar workers, pensioners and all sections of society are included in the budget, Şimşek continued his words as follows:
“We have made significant progress in strengthening the foundations. We know and accept that there are no easy solutions to the challenges we face in the global economy and the structural problems in our country. We have implemented a program to solve these problems.” And we will continue to implement it resolutely. On the one hand, our goal is to solve the fundamental problems. We will increase investment, employment and exports more efficiently. Inflation is not a new problem in the 70s and 80s. “It was also a problem in the 90s. We reduced it to single digits during the AK Party period, and we will reduce it to single digits again.”
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