Mehmed Simsek’s statement on inflation: The hardest part is behind us
Mehmet Şimşek stressed that the goal of exiting KKM remains and that the exit will accelerate this month. He spoke about reserves, inflation and the greylist:
“Deposits, which peaked at $143 billion last year, are now below $60 billion. With further acceleration in exits from KKM in July, Turkey is set to close this chapter.”
Reserve
Responding to criticism that most of the reserves come from hot money, Mehmed Simsek’s key remarks were as follows:
“For the first time since 2017, access to long-term resources such as capital by our country’s banks has increased dramatically, with about $5 billion accessed from the global system in the past few months. The increase in reserves is not hot money, as some claim, but most of it comes from foreign currency, due to the confidence of our people and businesses in the program.” This is explained by the transition to TL, which is more than 2/3. The second is due to the fact that banks and the real sector have more than 100% access to external resources.
Greylist
Turkey was recently removed from the grey list by unanimous vote and thunderous applause at the General Assembly in Singapore, where I visited last week.
Inflation: Difficulties remain
The worst of inflation is over. It will not be an easy process. Turkiye has experience with de-inflation but has not been successful. It will take time to re-establish a strong monetary policy. This time last year, we said we needed a one-year transition period, during which inflation would rise, peak in May this year, and then start to fall permanently. “Most likely, inflation will be at 60 percent next month and fall to 50 percent the next month.”
Prime Minister Mehmet Symşek maintained that his main goal was to permanently boost welfare and ensure Turkey’s permanent entry into the ranks of high-income countries, saying, “This year, Turkey will leave the group of middle-income countries and become one of the high-income countries in Turkey. “Price stability is necessary for sustainable growth,” he said, adding, “The most important way to permanently reverse the deterioration of income distribution is to permanently reduce inflation.”
“Our preferences are very clear.”
Mehmet Simsek also insisted that he would not place the burden of his economic plans on low-income earners.
“The burden of this program must be shared fairly by all. Of course, we do not intend to place the burden on low-income Americans. Currently, minimum wage workers pay ‘zero’ in income tax up to the minimum wage. Our preferences are very clear…”
“Our goal is tax justice.”
Minister Şimşek explained the data plans from the perspective of “unregistered transactions” and outlined the planned initiatives:
“Our aim is to relentlessly wage the fight against unregistered labor. In fact, we have succeeded. There is no action plan. It was reported by the likes of ChatGPT that we are preparing the infrastructure for all taxpayers in Turkey to be audited by artificial intelligence. We are setting up a team at the Ministry of Finance to see what our capabilities are and review the situation. “Our aim is to ensure tax fairness.”
Şimşek said there was significant public debt around the world and high interest rates made the debt a very serious problem that was holding back global economic growth.
