Turkish Treasury and Finance Minister Mehmet Simsek has announced plans to increase currency reserves as Turkey tightens its monetary policy. Simsek made this commitment after meeting with investors in London as part of his efforts to boost confidence in Turkey’s economy and attract foreign capital. The International Monetary Fund (IMF) welcomed Turkey’s policy shift and forecasted slower growth and a narrower current-account deficit for 2024. As Turkey’s monetary policy tightens, the IMF predicts that growth will slow to 3.25 percent in 2024 from 4 percent in 2023.
The IMF also expects Turkey’s current-account deficit to narrow to approximately 3 percent of the gross domestic product in 2024, with inflation projected to decrease to 46 percent by December 2024. The institution emphasized the importance of prioritizing disinflation, liberalizing financial regulations, improving the functioning of money and credit markets, and containing the fiscal deficit to maintain the positive momentum. Simsek, a former Merrill Lynch strategist, was appointed by President Recep Tayyip Erdogan to lead Turkey’s economy alongside Central Bank Governor Hafize Gaye Erkan.
The IMF noted that recent actions to raise the policy rate, increase taxes, and liberalize certain financial sector measures have reduced risks and improved investor confidence in Turkey. These measures have also contributed to compressing spreads and enhancing the reserve position of the Central Bank of Turkey. Overall, the IMF supports Turkey’s current policy direction and encourages the government to continue building on the current momentum to strengthen the economy.
