4/12/2019

Turkey Inaugurates New Structural Reforms

The Minister of Treasury and Finance Berat Albayrak announced an economic reform package with a new set of structural reforms focusing on the banking and financial sectors. At the launch meeting, Minister Albayrak said that the government would boost banks' capital to further support exports of the real sector. He added that there would also be an adjustment in taxes as part of the reform plan meant to revive the economy.

 

According to the reform plan, state-owned banks’ capital structure will be supported with a Government Domestic Debt Security (GDDS) package worth TRY 28 billion; private banks’ capital structure will be supported as well. The option of capital increase will be available to address the possible effects of non-performing loans on the asset quality of private banks.

 

Moreover, a new legal and institutional framework will be crafted to revitalize loan restructuring and concordat-bankruptcy transactions. Some bad debts, particularly in the real estate and energy sectors, will be handed over to off-balance sheet private funds such as the Energy Entrepreneurship Capital Fund and the Real Estate Fund, which could be invested in by local and international investors.

 

The new structural reform package accelerates the full-scale fight against inflation as well. Accordingly, the agriculture sector will be stimulated by setting up the Partnership of Agriculture Credit Cooperation and Greenhouse Cooperation, which should help spur agricultural production. The supply chain in the food sector will also be restructured by establishing cooperatives, increasing producers’ share, boosting competition in production, and strengthening the oversight over wholesale, retail, and logistics in the sector. Animal breeding will be supported by consolidating the supply chain to better connect the producers and the consumers.

 

The incentives mechanism will be modified to increase credit availability in strategic sectors, and a more export and production-oriented credit supply mechanism will be provided.

 

The plan also envisages that the overall retirement system will be reformed to boost savings, thereby decreasing reliance on external financing, and that projected pool of funds will reach around 10 percent of Turkey’s GDP in five years. The Insurance Regulation and Supervision Agency will be instituted to increase savings, according to the reform plan.

 

A tight fiscal policy will be implemented within the scope of the reform plan. Measures will be implemented to increase savings and income worth by TRY 76 billion, and a new tax scheme will be operationalized to make the tax burden more equitable via the expansion of the taxpayer base in the economy. Exceptional tax implementations will not be utilized going forward, and the new tax scheme will support employment generation and fight against off-the-books economic transactions.

 

The incentives mechanism will be modified to increase credit availability in strategic sectors, and a more export and production-oriented credit supply mechanism will be provided.

turkey; reforms; incentives; albayrak; investment

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