Treasury and Finance Minister Mehmet Şimşek on Friday said strong measures meant to enhance public savings will come into force in the second half of the year, indicating that the related studies have reached their final stages.

Şimşek, along with his economic policy team and the Central Bank of the Republic of Türkiye (CBRT), has taken steps since June of last year to combat soaring inflation as the country walked away from years of easing policy.

The central bank delivered aggressive tightening through interest rate hikes and other channels to mainly cool domestic demand, the main driver of inflation.

Currently running at 68.5%, inflation remains above the targets set in the government's Medium-Term Program (MTP), unveiled in September.

Experts emphasize the necessity of reducing public spending to take price gains under control.

Both Şimşek and President Recep Tayyip Erdoğan have recently repeatedly emphasized the importance of public savings.

Earlier this month, Erdoğan said increasing public savings would be among the steps the government will announce soon to strengthen its economic program.

The steps will also focus on prioritizing investments and accelerating structural reforms, according to the president.

Speaking at the Uludağ Economic Summit in Sapanca in northwestern Sakarya province, Şimşek said the economic program is proceeding "exactly as we planned, and it is even performing better than expected in some areas."

He noted that by the second half of 2024, results will be concretely evident.

Şimşek stated that the government would reinforce the MTP and take fiscal policy measures to support the anticipated decline in inflation in the second half of the year.

"We will focus on expenditure this year, and we have finalized our efforts regarding public savings," Şimşek said, affirming that related steps would be implemented "strongly" in the second half.

The policy pivot after last year's presidential and parliamentary elections also seeks to rebuild foreign exchange reserves and reduce chronic current account and budget deficits to surpluses.

Şimşek expressed confidence that the budget deficit as a percentage of gross domestic product (GDP) will not exceed 3% from the next year onward, and they will support the CBRT in achieving disinflation.

Fiscal policy to support disinflation

The minister believes that market inflation expectations will gradually converge toward the government's targets over time.

Şimşek said price stability, fiscal discipline, and a sustainable current account deficit are priorities, with the final target being to achieve sustainable high economic growth.

Since last June, the central bank has added 4,150 basis points to borrowing costs. Policymakers have said a tight stance will be maintained until a significant decline in monthly inflation is observed.

The bank held its benchmark one-week repo rate steady on Thursday but left the door open to additional hikes "in case a significant and persistent deterioration in inflation is foreseen."

Compared to where borrowing costs stand, Şimşek said, "Monetary policy is tighter, and I emphasize this."

Last week, CBRT Governor Fatih Karahan told a panel in Washington that the rate-hiking cycle is over and inflation is on track to reach its 36% target by the end of the year.

Inflation is forecast to peak around 70% this quarter before falling in the second half of this year and through 2025.

"The transmission mechanism of monetary policy is working with delays; therefore, in the upcoming period, we will take fiscal policy steps to support disinflation," Şimşek said.

"We will also provide permanent support to disinflation through structural reforms."

Şimşek said Türkiye's foreign exchange reserves have not yet reached the desired level. But he stressed that the possibility of reserve accumulation will arise once the current account deficit falls below 2.5% of GDP.

"There is a recovery in reserves; we are not where we desire to be; this is a process," he said.

The minister said the annualized current account deficit will most likely reach around $25 billion this year.

Şimşek also stated that Türkiye's credit rating will improve within the next few months.