Vice President Cevdet Yılmaz said he expects savings from the government's new efficiency plan to outstrip estimates as Türkiye continues the fight against inflation this summer with the full backing of President Recep Tayyip Erdoğan.

Yılmaz, in an interview with Reuters on Thursday, said he expects an international crime watchdog to remove Türkiye's "gray-listing" next month. Not upgrading Türkiye in June would amount to a political decision by the Financial Action Task Force (FATF), he said.

Yılmaz, who over the last year has spearheaded a major shift toward a more orthodox economic policy, predicted that summer price relief would help convince skeptical households that inflation is dipping after years of soaring prices.

To bolster the central bank's aggressive interest rate hikes, Yılmaz and Treasury and Finance Minister Mehmet Şimşek unveiled a "savings and productivity" plan on Monday focused on pausing construction of most new state buildings and public institutions' purchase of vehicles for three years.

Though they did not outline expected budget savings, some analysts said it could amount to roughly TL 100 billion ($3.1 billion).

"It looks like it will be far above that," Yılmaz said of the estimate, speaking in his office at the Presidential Palace in Ankara.

"We believe we will experience a serious break in inflation, especially in the summer period this year," he said.

"The improvements in certain issues that affect daily life will positively impact our citizens' perception," and "create a different psychology in terms of inflation expectations."

Annual inflation reached nearly 70% in April and is expected to peak in May at around 75%, after which the central bank expects it to fall to 38% by the end of the year as the monetary tightening weighs.

Lifting 'political uncertainty'

A longtime member of the ruling Justice and Development Party (AK Party), Yılmaz, alongside Şimşek, was appointed in June last year to reverse years of loose monetary policy.

Since Erdoğan was reelected in May last year, Türkiye has eased macroprudential measures and delivered aggressive monetary tightening aimed at cooling demand, the main driver of inflation.

The Central Bank of the Republic of Türkiye (CBRT) has hiked interest rates to 50%, from 8.5% last June.

Yılmaz told Reuters that last year's election lifted any "political uncertainty" about Erdoğan's determination to lower inflation.

"He states that he stands behind (the economic program) and that he supports it at every opportunity ... I believe there are no doubts left on this issue," Yılmaz said.

The government's medium-term economic program, unveiled in September, is centered around rebuilding foreign exchange reserves and curbing current account and budget deficits, in addition to taming inflation.

Yılmaz added he is confident the central bank will hit its inflation target even if it does not hit the "bull's-eye" exactly at year-end.

Analysts said the savings and productivity plan would help rein in spending but that more cuts were needed, perhaps to public sector salaries or pensions, in order to help hit the inflation goal.

Gray list

The FATF, set up by the G-7 to protect the global financial system, gray-listed Türkiye in 2021. The list includes countries that the watchdog suggests have taken insufficient action to prevent money laundering and terrorist financing.

Yılmaz confirmed that a FATF team held an "on-site" visit with Turkish authorities this month ahead of a June 28 decision on whether to upgrade the country.

"I think we will be taken off the FATF gray list in June. If we are not, I believe this will be due to political reasons, not technical reasons," he said.

"From a technical aspect, I believe there are no obstacles left. I think Türkiye fully meets the technical criteria," he added.

In its last statement on Türkiye, in February, the FATF said it made an initial determination that the country "has substantially completed its action plan" and warrants an on-site assessment.

In November, Şimşek said the country was fully compliant with all but one of the watchdog's 40 standards. That included technical compliance related to cryptocurrency assets.

The AK Party on Thursday submitted the draft law, which will bring crypto assets within the scope of the capital markets law, to the parliament.

Research shows that an upgrade could lead to more foreign direct investment (FDI), which Yılmaz said is not yet at the desired levels.

Türkiye's FDI inflows amounted to $1.5 billion in the first quarter of the year, down 52% from the quarterly average in the previous three years, according to the International Investors Association.