Treasury and Finance Minister Mehmet Simsek reportedly assured investors of the government’s commitment to tight fiscal discipline during a meeting in New York, co-hosted by Goldman Sachs and the Türkiye-U.S. Business Council.
Spending control, fight against shadow economy
Speaking alongside Trade Minister Omer Bolat and central bank Governor Fatih Karahan, Simsek emphasized that fiscal restraint and efforts to curb the shadow economy would be essential for achieving disinflation, according to a person familiar with the discussions.
Simsek stated that no new taxes are planned at the moment, stressing that fiscal discipline will be crucial in the government’s strategy to lower inflation.
The meeting took place on the sidelines of the U.N. General Assembly and was closed to the press.
Return to conventional policies
Since Türkiye’s pivot to tighter monetary policies last year, Simsek has sought to reassure investors of President Recep Tayyip Erdogan’s renewed commitment to conventional economic strategies.
Erdogan had previously pursued an unorthodox approach, advocating for interest rate cuts as a way to combat inflation. However, under Simsek’s stewardship, Türkiye has returned to more traditional policies aimed at stabilizing the economy.
The country’s benchmark interest rate has been held at 50% for the past six months in an effort to tackle inflation, which peaked at 75% earlier this year.
Simsek noted that the delayed impact of these monetary policies, combined with a disciplined fiscal approach, would be the primary drivers of disinflation.
Investor interest grows
Simsek dismissed concerns that fiscal tightening would hinder growth, highlighting the renewed interest from foreign investors in Turkish assets this year.
Many are betting on the lira through carry trades or by holding shorter-term bonds.
Despite this interest, foreign direct investment (FDI) inflows reached only $2 billion in the first half of the year, significantly lower than the pre-pandemic decade’s average.
President Erdogan also addressed American firms earlier this week, encouraging them to take advantage of investment opportunities in Türkiye, particularly in sectors like aviation and banking, with his government’s backing.
