Mehmet Şimşek: We will reduce credit growth

Mehmet Şimşek

Mehmet Şimşek, the Minister of Treasury and Finance, said, “We will reduce credit growth not only by increasing interest rates on credit cards, personal loans, vehicle loans, and second home loans but also by curbing the appetite for lending through banks.”

Mehmet Şimşek, the Minister of Treasury and Finance, stated in a televised interview on NTV that the global economy is experiencing a period of low growth. Here are the key points from Şimşek’s statements:

  • In the Medium-Term Program announced last week, our top priority is to reduce inflation.
  • The Medium-Term Program has three main components. One of them is tackling one of the most important macroeconomic problems our country is facing, which is fighting inflation. This program aims to bring inflation back to reasonable levels, ideally to single digits.
  • The de-inflation program is the most significant goal of our medium-term program. Our primary priority is price stability.
  • The second component of the program is fiscal discipline. In the past, one of the strongest aspects of AK Party governments has been the role of fiscal policy as an anchor. We keep budget deficits low, allowing us to present budgets focused on projects and investments to our people.
  • Looking at the next three years, due to factors such as earthquakes and decisions made in the past, there is a slight deterioration in the budget, except for the earthquake. Our goal is to reduce the budget deficit to 3%, excluding the impact of the earthquake.

“We have outlined which reforms will be implemented in which quarters.”

  • The third important component is structural reforms. I can say this clearly: if Turkey is to increase its competitiveness and grow through productivity, there will be a serious effort for structural transformation aimed at both investing in productive areas and the efficient use of existing resources. We have not only presented this as a text but also scheduled it. We have outlined which reforms will be implemented in which quarters.

Minister of Treasury and Finance Mehmet Şimşek said, “We do not have an exchange rate target” regarding the exchange rates that caused controversy in the MTP.

  • As of September 1st, the annual credit volume had increased by around 140%. This is more than double the inflation rate. With such a high level of credit growth, you cannot control inflation and the current account deficit. We will not make any changes to lending for primary residences. However, when it comes to loans for second or third homes or vacation properties, we will not support them. We will significantly restrict both the pricing and the quantity of loans in these areas.

UAE Announces a Program Close to 51 Billion Dollars

  • When we sought resources for the program and looked for investments in Turkey, we first visited friendly countries. The United Arab Emirates showed great interest and announced a program close to 51 billion dollars. An important part of this program is related to addressing earthquake-related issues, and an 8.5 billion-dollar bond issuance is on the agenda. I believe that this 8.5 billion-dollar bond issuance will take place before the end of this year. We will also issue 3 billion dollars in bonds for the financing of exports.
  • In total, an 11.5 billion-dollar bond issuance is likely to be completed within this year. Within the 51 billion dollars of the UAE, they plan approximately 27 billion dollars of investment in renewable energy. This includes everything from storage to solar and wind energy, industry, tourism, and especially technology investments.

35 Billion Dollar Package from the World Bank Together with the Central Bank Governor, we had a long meeting with the President of the World Bank. We shared our program with them. They also said that they would allocate an additional 18 billion dollars on top of the existing 17 billion-dollar plan to support our program. A total of 35 billion dollars from the World Bank will be offered to Turkey.

“We will proceed gradually regarding the future of the exchange rate protection.” I prefer not to talk too much about exchange rate protection. Our priority is to implement the program. Our priority is to accumulate reserves. We will implement our exit strategy from exchange rate protection as we succeed in these goals. Do we have a strategy? Yes, we do. We will also proceed gradually in this regard.

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