After the President’s Cabinet was announced, the Economy Coordination Board convened quickly and the steps regarding the road map of economic management were determined.
As a first action, an additional budget arrangement for this year, which is important for healing the wounds of the February 6 earthquake, which was described as the disaster of the century, was prepared and accepted in the Turkish Grand National Assembly. With the additional budget, a total of 527.3 billion lira was allocated for purposes such as meeting the needs of citizens damaged by the earthquake and repairing the damage to the building stock of public administrations, including 482.8 billion lira for the construction of disaster residences and repairing infrastructure damage. This year, considering other appropriation opportunities, a total of 762 billion lira was planned to be spent from the budget to eliminate earthquake damages.
The lowest civil servant salary increased to 22 thousand 17 lira
In addition to the additional budget, regulations regarding the compensation of economic losses caused by the earthquakes that occurred on February 6, including the increase of the minimum civil servant salary to 22 thousand 17 liras, were also enacted. This regulation, called the “National Solidarity Package”, aimed to compensate for the burden on the budget due to earthquakes. With the regulation, it was also decided to increase pensions by 25 percent.
In this process, with the savings circular sent to public institutions, it was requested that all expenses be reviewed, except for earthquake-related costs.
Tax loss and evasion was closely monitored
While the steps to combat the informal economy were intensified, tax losses and evasion, especially taxpayers who applied VAT rates incorrectly, were closely monitored.
Minimum wage was 11 thousand 402 lira net
The economic management, which started its duty quickly, also quickly completed the process regarding the minimum wage to be implemented in the second half of this year. With the negotiations, the minimum wage was determined as 11 thousand 402 lira net.
Economic diplomacy agenda was busy
In addition to issues related to the domestic agenda such as economic management, budget and wages, he also intensified economic diplomacy.
Vice President Yılmaz and Treasury and Finance Minister Şimşek first went to the United Arab Emirates (UAE) and then to Qatar. Both names had contacts with the senior administrators of this country. Following these preliminary meetings, a Gulf tour was held under the leadership of President Recep Tayyip Erdoğan to the countries in question, including Saudi Arabia. During this round, important cooperation agreements were signed.
While Şimşek held various meetings with foreign investors, including Japanese company executives, he went to Saudi Arabia with the President of the Central Bank of the Republic of Turkey, Hafize Gaye Erkan, and then attended the G20 meetings held in India.
The Investment Environment Improvement Coordination Board (YOİKK) meeting was also held among the busy agenda of the economic management. At the meeting, preparations for the new term action plan, identified problems regarding the investment environment and solution suggestions were discussed. Within the scope of YOİKK studies, it was decided to complete the new term action plan by the end of September, and studies towards this are continuing.
Legislative packages and structural reform studies required to improve the investment environment will also be brought to the agenda of the Turkish Grand National Assembly in the new term.
Consultations were held with civil society
The economic management intensively continued its preparations for the MTP for the 2024-2026 period, which was announced to the public last week. Within the scope of MTP preparations, separate meetings were held with leading non-governmental organizations of the business world, financial sector representatives and unions.
Meetings such as the 2023 2nd Semester Economy and Consultation Meeting and the Turkish Economic Council were also held, where economic management and the business world came together. Here, the problems and solution suggestions of the business world were listened to.
The problems of the agricultural sector were also discussed at the Agricultural Producer Representatives Meeting. Leading representatives of the agricultural sector attended this meeting.
Budget work continues
While the MTP, which is the government’s three-year economic road map, was announced to the public by President Erdoğan, the three-year macroeconomic targets and structural reform agenda were also determined with this program.
The government’s agenda now includes the 2024 central government budget, which will be presented to the Turkish Grand National Assembly in October. Preparations for the budget continue intensively.
While the economic management continues its preparations for the 12th Development Plan, it is expected that this plan will be presented to the Turkish Grand National Assembly next month.
Important financial decisions were made
In this process, appointments were also made to the Presidencies of the Central Bank of the Republic of Turkey (CBRT) and BRSA. CBRT vice presidents were also re-determined after a while.
Within the scope of the decisions taken regarding financial markets, the tax advantages provided to exchange rate-protected deposit and participation accounts will continue until the end of the year in order to encourage savers to keep their savings in deposit and participation accounts opened in Turkish lira and to encourage the preservation of the value of the lira. The period of the reduced withholding rate applied to certain securities and the income obtained from Turkish lira deposit accounts and participation accounts opened in lira has also been extended until December 31, 2023.
Financing opportunity was provided to exporters with the credit protocol
Tradesmen and craftsmen, whose businesses were damaged in places declared as disaster areas after the earthquakes, were given the opportunity to postpone the repayments of loans extended by Halk Bank for another 6 months without interest.
The maximum credit guarantee limits that can be used per SME within the scope of the credit guarantee system have been increased.
Financing opportunity was provided to exporters with the loan protocol signed between the Turkish Exporters Assembly (TİM) and 11 banks.
With the practice put into effect by the Ministry of Treasury and Finance, a quota was introduced on gold imports in order to reduce the negative effects of unprocessed gold imports on the current account deficit and to support Turkey’s foreign exchange reserves. The quotas in question will be valid for unprocessed gold imports carried out by precious metals brokerage firms that are members of Borsa Istanbul AŞ.
Tight monetary policy practices came to the fore after Erkan took office
On the CBRT side, with Governor Erkan taking office, tight monetary policy practices came to the fore. In this context, practices were implemented to increase the weight of Turkish lira savings in the assets and liabilities of the banking sector. The Central Bank’s simplification process and gradual steps regarding the transition of exchange rate-protected deposits to Turkish lira deposits came to the fore.
In the first Monetary Policy Committee (PPK) meeting held during Erkan’s term, the one-week repo auction interest rate, which is the policy rate, was increased by 650 basis points to 15 percent. In its second meeting, the Board increased the interest rate by 250 basis points to 17.50 percent. The interest rate was increased by 750 basis points at the last meeting and reached 25 percent.
Installment decision from BRSA
BRSA also took steps to support financial stability. Installment periods for credit cards determined by the Board decision; It was decided that it will not be applied to expenses related to airlines, travel agencies and accommodation abroad and that there will be no installments for these expenses. Within the scope of land, in the calculation of capital adequacy standard ratios; It was decided to increase the risk weights of consumer loans, individual credit cards, vehicle loans for the acquisition of passenger vehicles and vehicle collateral loans, and financial leasing transactions to be made with consumers.
Loan to value ratio in second home was narrowed
BRSA made changes to the loan value ratios to be applied in housing loans and housing guaranteed loans. According to the Board’s decision, there will be no change in the loan-to-value ratios for first home purchases, and for second and subsequent home purchases, the home loan-to-value ratio will be reduced by 75 percent if the consumer owns at least one home for himself, his spouse or his children under the age of 18.
Central Bank’s support for exports increased 10 times
CBRT took an important decision regarding rediscount loans that encourage exports. With the changes it made in July, the CBRT, which eased the conditions for access to credit by removing conditions such as the 30 percent additional foreign exchange sales requirement and the advance foreign exchange sales requirement and increased the daily credit disbursement limit to 1.5 billion TL, has now increased the limit to 3 billion TL.
“We prioritize our exporters’ access to finance”
Central Bank Governor Hafize Gaye Erkan said that they are resolutely implementing their road map along with selective credit tightening to ensure disinflation as soon as possible.
Stating that they prioritized access to finance for exporters who contribute to the current account balance during the transition to disinflation, Erkan said, “We will continue to support practices to increase the share of SMEs in rediscount loans, which make a significant contribution to the increase in employment and exports.” said.
“For permanent prosperity increase, we need to make more export-oriented investments”
Minister of Treasury and Finance Mehmet Şimşek also evaluated the Central Bank’s decision in his statement on social media.
Şimşek noted that they increased the daily credit limit for exporters by 10 times in a three-month period.
Emphasizing that this shows how serious they are about prioritizing exports, Şimşek said, “We need to make more export-oriented investments for a permanent increase in prosperity. By ensuring price stability in the medium term, we will ensure that our companies have access to subordinated loans in global markets.” said.
