Türkiye to stay course on disinflation program: Finance minister

Türkiye will maintain its economic program and deliver disinflation despite difficult global and geopolitical conditions, Treasury and Finance Minister Mehmet Şimşek said Wednesday.

Şimşek joined Vice President Cevdet Yılmaz and Presidency of Strategy and Budget head İbrahim Şenel at the Presidential Complex for an international media meeting on Türkiye's 2027-2029 Medium-Term Program.

"The only criticism we would accept is that we have been ambitious in our targets. We have, and there is, of course, a cost associated with that. But the commitment is there," he said.

"We will stay the course and deliver. What is important is the direction of travel."

TÜRKİYE COMMITTED TO COMBATING ILLICIT FINANCE

Şimşek said Türkiye maintains close cooperation and effective information-sharing with its partners and allies, particularly the US.

"Türkiye is committed to combating terrorist financing, any form of illicit financial activity, money laundering, sanctions evasion and all forms of illicit trade," he said.

All companies operating in Türkiye must comply fully with national regulations and avoid sanctions, while competent authorities are assessing recent US Treasury announcements and allegations within the rule of law, he added.

WELL-ESTABLISHED FRAMEWORK FOR IRAN GAS PAYMENTS

Şimşek said Türkiye's gas contracts with neighbors such as Iran and Russia are long-term agreements, some of which have been in place for decades.

"We do not pay Iran directly for the natural gas. We have an understanding, again, with the US. The money sits in a very tightly regulated account, and payments can only be made for items such as food and medicine," he said.

"There is a well-established framework governing how natural gas payments are managed."

Iran accounts for a relatively small share of Türkiye's gas imports, while the country has invested heavily in alternative supplies and storage, Şimşek said, noting that the US is now one of Türkiye's leading LNG suppliers.

RETURN TO FREE FLOAT

Şimşek said returning to a free-floating exchange rate is desirable because it acts as a shock absorber, but lower inflation, better-anchored inflation expectations and two-way foreign-exchange flows are needed first.

"This is not about being afraid of returning to a free float. It is about getting the conditions right," he said, calling speculation over an imminent change "baseless."

He stressed that daily exchange-rate policy is conducted by the Central Bank and that the Medium-Term Program assumes a neutral real exchange rate.

"We are not in the business of making bets on the exchange rate," he added.

'COMMITMENT TO PRICE STABILITY REMAINS VERY STRONG'

Şimşek rejected claims that the 2027 inflation target was revised upward to permit looser monetary policy.

"The idea that the inflation target for 2027 was revised upward in order to loosen monetary policy never came onto our agenda," he said.

He said the program reflects significant changes in energy, agricultural and other commodity prices, as well as the difficult geopolitical environment.

"When the facts change, of course, forecasts change," he said.

Şimşek said Türkiye's disinflation program began in earnest in mid-2024, noting that international experience showed inflation typically takes 3.4 years to return to pre-shock levels.

"If you take that as a reference — 2025, 2026, and then essentially the end of 2027 — I think we'll be back to pre-shock levels," he said.

HOUSING AND SELECTIVE CREDIT SUPPORT

Şimşek said Türkiye has invested $104 billion in earthquake reconstruction, with 621,000 housing units delivered or due to be delivered this year.

Rent inflation in earthquake-hit provinces is around 20%, compared with 50%-60% elsewhere, demonstrating that "supply-side measures make a huge difference," he said.

The government also plans 750,000 state-funded social housing units to ease housing and rental costs.

Şimşek said selective credit programs support manufacturers, farmers, small businesses and technology investments, helping preserve employment and create jobs.

"The ultimate goal of this program is a sustainable high growth rate and better income distribution. So, basically, better standards of living for Turkish people," he said.