16.12.2025 00:20
During the ongoing discussions of the '2026 Central Government Budget Law Proposal' in the General Assembly of the Parliament, Minister of Treasury and Finance Mehmet Şimşek made a presentation regarding his ministry and its affiliated institutions, and he provided a hopeful announcement for tenants. Minister Şimşek stated, "Especially in the last two years, rent and education inflation have increased at least twice as fast as the headline rate. However, in the upcoming period, the social housing mobilization and the completion of earthquake housing will increase the housing supply and limit rent increases."
The Minister of Treasury and Finance, Mehmet Şimşek, made a presentation regarding his ministry and its affiliated institutions during the discussions of the '2026 Central Government Budget Law Proposal' in the General Assembly of the Turkish Grand National Assembly (TBMM).
Starting his speech by wishing God's mercy for the late Mayor of Şehzadeler, Gülşah Durbay, and expressing condolences to his family, relatives, and the Republican People's Party (CHP), Şimşek noted that inflation, which settled in the 64-65% band at the end of 2022-2023, dropped to 44.4% last year.
"THE INCREASE IN HOUSING SUPPLY WILL LIMIT RENT INCREASES" Minister Şimşek continued his remarks as follows: "As of November this year, it has reached 31.1%. Of course, this is somewhat above our targets. I want to express this: The core goods inflation in durable consumer goods, clothing, etc., has actually dropped to 18.6%. Food inflation has decreased to 27%. The main reason for the headline inflation being above 30% is that, just like in the world, service sector inflation in Turkey is responding late to disinflation measures. There is rigidity in service inflation in our country. There is a past indexation. Additionally, we had previously set an upper limit for rent by law and an upper limit for education. Of course, there are effects of this as well. Especially in the last two years, rent and education inflation have increased at least twice as fast as the headline. However, in the upcoming period, with the social housing mobilization and the completion of earthquake housing, housing supply is increasing and will limit rent increases.
"UPDATES IN FAVOR OF CITIZENS WILL BE AT A HIGHER RATE" Moreover, our esteemed Parliament has accepted a value-based pricing model for education. Again, within the framework of budgetary possibilities, we will determine tax and fee updates for 2026 not at the revaluation rate we targeted, but at the inflation rate we aim for. However, I want to emphasize this; we will increase updates in the tax legislation that are in favor of our citizens, such as the income tax tariff, at a higher rate, that is, at the revaluation rate of 25.5%. Therefore, while determining public prices between 16-19%, we will apply the revaluation rate for matters in favor of citizens."
"THIS YEAR, THE CURRENT ACCOUNT DEFICIT IS IN LINE WITH OUR TARGETS" Minister Şimşek stated that inflation will continue to decrease in line with targets in 2026. Şimşek said, "We have particularly removed the current account deficit issue from being a source of concern. If we go back to the beginning of the program we implemented, the current account deficit was over 5% of national income. It decreased to 0.8% in 2024. In fact, if you set aside the gold that is predominantly imported as a portfolio preference, we had a surplus in the current balance last year, with a surplus of 3.2 billion dollars. This year, the current account deficit is also in line with our targets. There is a significant improvement. We have made considerable progress, especially in green transformation. Today, we meet 15% of our oil needs and 16% of our natural gas needs with our own production. The share of renewable energy in installed capacity has risen to 62%, but due to drought, its share in production this year is 45%. As Turkey's dependence on foreign energy decreases, the current balance is improving permanently. Over the last 23 years, we have paid a total of 1 trillion dollars for the import of oil, natural gas, and their derivatives. Of course, as we make progress here, a structural transformation will be achieved. With the improvement in the current balance, our gross external financing requirement, which has risen to 23% of national income, is expected to fall below 17% this year. By the end of the program period, it will likely drop to around 13-14%. This will strengthen stability in financial markets and the economy," he said.
"WITH THE STRENGTHENING OF OUR FINANCIAL STABILITY, THE RISK PERCEPTION OF OUR COUNTRY IS IMPROVING" Minister Şimşek stated that they have achieved reserve adequacy according to international standards, noting, "As of May 2023, our gross reserves are 88 billion dollars, and net reserves excluding swaps have increased to approximately 123 billion dollars. We have successfully managed the exit from the currency-protected deposits, which is an important conditional liability. Thus, if you evaluate the increase in net reserves together with the decrease in conditional liabilities, there is an improvement of approximately 260-265 billion dollars in our country's balance sheet. Trust in the Turkish lira has increased during this period. The share of the Turkish lira in total deposits is currently over 60%. Of course, all of this has reflected on our country's risk premium. With the strengthening of our financial stability, the risk perception of our country is also improving. Look, our risk premium, which rose to 700 basis points before the program, has decreased to 216 basis points as of today. In other words, we have reached the lowest level since May 2018," he said.
"OUR COSTS OF BORROWING FROM ABROAD HAVE DROPPED BY HALF" Reminding that the risk premium in developing countries has decreased by 62 basis points, while in Turkey it has decreased by 487 basis points, Şimşek stated, "Turkey has differentiated positively thanks to the program. You may ask what benefit the decreasing risk premium brings us. Especially, the borrowing costs for both the public and the private sector have significantly decreased. I am not talking about a theoretical matter. In May 2023, the interest rate on our 5-year dollar-denominated bond was 11.3%. Today, it is around 5.5%. In other words, our costs of borrowing from abroad have dropped by half. The access of the real sector and our banks to external financing has increased. Look, the external debt rollover ratios in the first five months of 2023 were 70%, and for the banking sector, it was 97%. If you look at the average of the last 2.5 years, it has reached 151% for the real sector and 186% for banks. The success of our program is, of course, also confirmed by rating agencies. Exceptionally, in the last 2.5 years, our credit rating has been raised by 2 to 3 notches," he said.
"OUR EXPECTATION DURING THE OVP PERIOD IS TO PROVIDE EMPLOYMENT FOR 2.5 MILLION CITIZENS" Şimşek stated that they have taken measures against carry trade transactions, saying, "Our Central Bank has raised the required reserves against carry trade twice in the last six months. It has also been differentiated by maturities. Required reserves; from 8% to 12% for deposits from foreign banks, and from 8% to between 12% and 18% depending on the maturity for funds obtained from foreign repo transactions and foreign loans. In other words, we are taking measures against carry trade.
Both domestic and foreign investors do not have any inflation adjustment on the gross income of deposits and funds. We are collecting a withholding tax of 17.5%. During this period, economic activity remained moderate. However, with the disinflation process, we will return to a sustainable high growth path. In the last two years, global growth has averaged 3.2%. However, the growth of our trading partners, especially in the European Union, has an average growth of 2.2%. During this period, Turkey grew by around 3.5%. Along with disinflation, we believe that growth will gradually rise again. Our expectation during the OVP period is that employment will be provided for 2.5 million of our citizens. We have established fiscal discipline, and we must maintain this with determination; we will continue to do so," he stated.
Source: AA / İHA
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