"Signal of a discount on fuel and tobacco products from Mehmet Şimşek."

The Economic Coordination Council was held in Şanlıurfa under the chairmanship of Vice President Cevdet Yılmaz. Minister of Treasury and Finance Mehmet Şimşek answered journalists' questions regarding the agenda in Şanlıurfa. First of all, we are determined to reduce inflation; inflation is decreasing. At the end of 2022, it was around 64 percent, in 2023 it is around 65 percent, and our Central Bank has a prediction that we will likely close the year in the range of 44-45 percent, so inflation is decreasing, and in 2025, inflation will continue to decrease for four reasons.

Firstly, of course, monetary policy has a delayed effect; the contribution of monetary policy to the disinflationary process will continue in the following period, and the delayed effect will be relevant for 18 months. Secondly, in 2025, we aim to reduce the budget deficit from around 5 percent to around 3 percent, so the decrease in the budget deficit will have a very clear disinflationary effect. Thirdly, we are showing maximum sensitivity regarding administered and directed prices. For example, in 2024, natural gas and electricity price increases were around 38 percent, which means it went parallel to the Central Bank's original target; we will have a similar approach in 2025.

DISCOUNT SIGNAL IN FUEL AND TOBACCO PRODUCTS

There are a few important factors here; I mean, if we set aside electricity and natural gas, we will take an approach regarding fuel and tobacco product taxes that will not jeopardize the inflation target. Normally, there would be an increase in taxes under normal conditions, based on the last 6 months of domestic producer price index, which is quite low; since the inflation figure for the end of the year has not been announced, it would not be correct to give a precise number, but you will see that the inflation in 2025 will be in a way that does not jeopardize it.

Here, we might evaluate fuel in terms of limitation; many other fees and charges that increase with the revaluation rate are not in the inflation basket because a passport is not something you obtain continuously, and an identity card is not something you obtain continuously; therefore, they are services provided in return for services that households periodically receive based on their needs.

Therefore, energy price adjustments are very critical here. In administered and directed prices, fuel taxes are important, and the taxes on tobacco products are evaluated separately because the effects of others on inflation are either non-existent or very limited. We look at it from the perspective of the revenue side of the budget, but we will seriously consider the Central Bank's 2025 target in other administered and directed prices.

INCREASING SOCIAL HOUSING SUPPLY IS AN IMPORTANT COMPONENT OF SUPPLY-SIDE POLICIES

Of course, the main question asked was: Reforms. Here, what is actually meant is supply-side disinflation policy. As our esteemed ministers mentioned earlier, our priority is of course to increase food supply, and for that reason, we will continue to provide strong support in matters such as irrigation, land consolidation, food logistics, and the establishment of food specialization zones by our Ministry of Agriculture. In other words, we will prioritize food supply in the budget, which is an important step for supply-side disinflation.

Secondly, of course, social housing, because rents are currently an important issue, and increasing the supply of social housing is again an important component of our supply-side policies. The transformation in energy has also been mentioned, which is very critical because it will indirectly support disinflation through the current account deficit. When you look at the last 21 years, Turkey's energy imports are 1.5 times Turkey's current account deficit, which is 948 billion dollars; therefore, thanks to the good work done by our Ministry of Energy, as our dependence on foreign energy decreases, inflationary pressures through the current account and exchange rate will also become more manageable.

THERE IS EFFICIENCY IN A COMPETITIVE ENVIRONMENT

So both food supply, energy supply, and social housing supply will all be effective. Again, our Ministry of Industry and Technology has taken very important initiatives, especially aimed at increasing production, increasing investments, and reducing the current account deficit; all of these support disinflation in the medium to long term, which is why these areas are already being supported through YTAK.

But one of the most critical areas is of course not to allow any concentration in any sector, meaning that monopolization should not be allowed on a sectoral or product basis. The most critical issue here is to facilitate entry and exit into the market for all products and sectors and to ensure that global integration continues strongly. Because there is efficiency in a competitive environment, there is innovation, and that is of course disinflationary.

Therefore, updating the Customs Union with the European Union is valuable; it is important to add agriculture, services, and public procurement there. Speaking of public procurement, public procurement reform is also an important reform in this context. Therefore, we actually see global integration as part of the disinflationary process.

THE EXIT PROCESS IN KKM WILL CONTINUE

When we look at all this, as I said earlier, the delayed effect of monetary policy, especially our forecasts regarding fiscal policy for 2025, administered and directed prices, and structural transformation, structural reforms will support disinflation permanently, so we have no hesitation in that regard.

The Central Bank has established the necessary framework for disinflation in monetary policy, and this framework will of course continue strongly.

As for the KKM issue, it is of course a target for us, but we have said before that the exit process will continue without causing any volatility in the markets, so to speak.

So far, this process has been managed very well; the KKM balance, which peaked at 144 billion dollars in August last year, has now decreased to the range of 30-35 billion dollars, of which about one-third belongs to legal entities, and the remainder consists of deposits belonging to individuals.

We have already removed the corporate tax exemption for legal entities, making it less attractive. We have also introduced withholding tax for individuals, so we will continue to take steps to make KKM even less attractive in the upcoming period. Indeed, our Central Bank has already made one or two regulations in that context recently.

ACCESS TO FINANCE WILL IMPROVE FOR ALL SEGMENTS

Besides that, there was a question regarding loans. Of course, we have no credit restrictions in areas such as agriculture, exports, investments, and tradesmen; in fact, we have interest subsidies through the budget in these areas. Therefore, look, we are providing rediscount loans in exports, and it is not a small amount; we are talking about 531 billion lira of rediscount loans in the last year.

When we take into account the other supports and items there, an additional 150-160 billion lira is also at stake. Again, we will provide 160 billion lira in support to our farmers as an interest subsidy for next year, and similarly, we will continue to cover 50% of the interest on the loans used by our tradesmen as the state.

As you can see, we are already providing subsidies in agriculture, exports, and tradesman loans. We also have significant interest support for investments through YTAK and the interest support in the incentives provided, which will be made much clearer with the new incentive system. However, we do not subsidize consumer loans, and we will not do so.

Inflation is decreasing, so in the upcoming period, access to finance will likely improve for all segments, and conditions will become more favorable. Indeed, global conditions are also becoming more supportive. As far as I understand, these were the questions that came to me. "