Turkish finance minister says 2021 will be reform year for the economy

Turkish Treasury and Finance Minister Lütfi Elvan said the government will announce a series of reforms next month to restructure and stabilise the economy.

Turkish President Recep Tayyip Erdoğan will provide details of the measures in the second week of March, Elvan said on Twitter on Thursday.

“2021 will be a reform year,” he said.  

Turkey’s government pledged steps to help boost investor confidence in the economy in November, after Erdoğan installed a new central bank governor and hired Elvan to replace his son-in-law Berat Albayrak as treasury and finance minister. Albayrak resigned suddenly early the same month after the lira hit a record low against the dollar.

Elvan has held a series of meetings with business associations, labour unions and other groups as he prepared the government’s plans, but little is known about the steps it will take.

In January, the International Monetary Fund recommended that Turkey implement a swathe of economic reforms to improve transparency and regulatory independence, tighten budget discipline and to deal with a pile of bad loans in the corporate sector and banking industry.

In a column for Ahval on Feb. 23 entitled “Where are Turkey’s economic reforms?” Mark Bentley, a former bureau chief for Bloomberg in Turkey, said measures for the economy were becoming overdue and it was unclear whether the government would implement any of the steps recommended by the IMF, citing its track record for unorthodox policies.

Under Albayrak, Turkey implemented a series of unorthodox measures to help shield the economy from the impact of the COVID-19 pandemic. They included engineering a borrowing boom spurred on by cheap loans from state-run banks, keeping central bank interest rates at below inflation and making it more difficult for foreign investors to short the lira, which fell to a succession of record lows against the dollar.

Over the past week, Elvan and Erdoğan have defended Albayrak's record on the economy. They were responding to criticism from the main opposition Republican People's Party (CHP) that Albyarak had wasted tens of billions of dollars of the nation's foreign currency reserves as the lira fell. The reserves are now deeply in the red when accounting for currency swap deals that the central bank conducted with state-run banks.

The comments by Evan and Erdoğan have helped spark losses for the lira. The lira had strengthened by 20 percent against the dollar since November, when Erdoğan replaced the central bank governor and the bank hiked interest rates sharply to defend the currency. The lira traded down 0.4 percent at 7.19 per dollar on Thursday, off highs of around 6.9 against the U.S. currency reached last week.

(This story was updated with lira value in the final paragraph.)