Ministry of Economy & Finance

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The Ministry of Finance (Turkish: Hazine ve Maliye) is the central executive body responsible for drafting and implementing government policy and legal regulations in the areas of budgetary management, taxation, insurance, public borrowing, state accounting and reporting, customs duties, financial markets, auditing, public debt, and the management of state assets. It also oversees financial support for public services and plays a vital role in the formulation of macroeconomic and fiscal policy.

The origins of Türkiye's central treasury institution date back to the Ottoman Empire, with formal financial authority consolidated in the early 19th century under Sultan Mahmud II. The modern Ministry of Finance was established following the foundation of the Republic in 1923 and has continued to evolve as the nation's primary financial authority.

The Ministry operates as the supreme authority in revenue administration and oversees several subordinate institutions, including the Revenue Administration (Gelir İdaresi Başkanlığı), the Public Financial Management and Control Directorate, and the General Directorate of National Property. It also collaborates with the Capital Markets Board (SPK) and Banking Regulation and Supervision Agency (BDDK) for financial market oversight.

Its mission is to promote economic development, ensure equitable distribution of national income, safeguard financial stability and national security, and strengthen public trust in the financial system of Türkiye through efficient and transparent fiscal management.

In Turkish politics, the Ministry of Treasury and Finance is considered one of the core “classical ministries,” alongside the Ministries of Interior, Foreign Affairs, Justice, and National Defense. The Minister of Treasury and Finance plays a central role in fiscal policy and has a key voice in economic decision-making, including the ability to block or condition proposals that have significant budgetary implications.

The current Finance Minister is Alexei Kudrin. He assumed office on January 16 2002. He was nominated by Prime Minister Valeriya Kuzmina and is a well-respected economist.

Minister Kudrin served as a senior analyst under the Prime Minister's office between 1991-1994 and then as director of financial regulations between 1994 and 1999. As a seasoned civil he is bringing a wealth of experience and expertise to the role. He received both a Bachelor and Masters degree in Economics from Oxford University.

Having served as a career civil servant in the Ministry of Finance and in the Prime Minister's office, Minister
Kudrin oversaw important regulations which limited the disastrous effects of the Shock-Therapy doctrine. Kudrin was a staunch advocate against the measures. He has pursued a conservative financial policy since becoming Minister but has since 2003 begun to adopt more expansionist financial measures.

Alexei Kudrin​

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Financial Coordination Memorandum CONFIDENTIAL & PRIVATE ACCESSIBILITY​

FILE INFORMATION​

Name:	Makroekonomik İstikrarın Yeniden Tesisi ve Kriz Yönetimi İçin Mali Strateji Paketi
Original Classification	Confidential Access – Internal Cabinet Circulation Only
Current Classification	Restricted Distribution with Ministerial Oversight
File Name	Fiscal Stabilization and Crisis Management Framework for the Reinforcement of National Economic Resilience
File Number	TRMOF FSC-042-MKIK/2006

I, Mustafa Rahmi Koç, in my capacity as Deputy Minister of Treasury and Finance, affirm the urgency and necessity of the enclosed framework, prepared under the direction of the Minister of Treasury and Finance and pursuant to the provisions of Law No. 5018 on Public Financial Management and Control, as well as Law No. 5436 on the Restructuring of Public Financial Administration. The enclosed strategy aims to guide Türkiye’s national response to the current economic emergency by establishing the fiscal, monetary, and institutional pillars required to stabilize the macroeconomic environment, preserve sovereign credibility, and mitigate systemic risk. This document has been developed in close consultation with the Central Bank, Financial Stability Committee, and external partners, and reflects both the legal and operational dimensions of extraordinary economic governance. This memorandum is submitted for urgent deliberation by the Ankara Breakfast Club, with the goal of informing the potential invocation of exceptional financial protocols under Article 119 of the Constitution of the Republic of Türkiye and associated statutes. All provisions have been reviewed to ensure compliance with the principles of proportionality, legality, transparency, and fiscal sustainability. Respectfully submitted for executive and parliamentary evaluation. Signed, Mustafa Rahmi Koç Deputy Minister Ministry of Treasury and Finance Republic of Türkiye

The Republic of Türkiye is presently gripped by its most profound economic and institutional crisis since the 2001 financial collapse. Amid an already fragile macroeconomic recovery, the deteriorating political climate, marked by a breakdown between communist civilian authorities and the entrenched Kemalist technocratic institutions, has sharply eroded investor confidence. As of this writing, the Turkish lira has depreciated by 67% against the U.S. dollar since Q1 2005, inflation has surged past 70%, and capital flight continues at an alarming pace. The banking system is under acute strain, foreign direct investment has virtually stalled, and macro fundamentals continue to deteriorate under the weight of political dysfunction and systemic uncertainty. 1. Macroeconomic Overview: GDP Performance: After the -5.7% contraction in 2001, Türkiye had staged a tentative recovery between 2002 and 2004 under a technocratic reform program. However, the recovery has since reversed. GDP growth has slowed sharply since late 2005 and is projected to contract again in real terms by at least -3.2% in FY2006, with Q3 data suggesting an accelerating decline in domestic output. Inflation and Currency Collapse: Consumer price inflation has reached 70.4% year-on-year, reversing several years of disinflation. The lira has lost two-thirds of its value against major currencies, driven by capital outflows, a collapsing trade balance, and a crisis of monetary credibility. Foreign reserves are dangerously low, limiting the Central Bank’s capacity to defend the currency. Financial Sector Breakdown: Over 20 banks have been nationalized or shuttered since the start of 2006, with several more under regulatory watch. Liquidity has dried up in the interbank market, and trust in public banking institutions has collapsed amid reports of politically motivated asset seizures and state intervention. The banking sector, already weakened by years of non-performing loans and political interference, is now facing a systemic solvency crisis. 2. Political Risk Assessment: The current economic collapse cannot be disentangled from the country’s profound institutional and political crisis. Following the unexpected electoral gains of the Workers Parties followed by a seizure of power by the pro-Worker Parties' unions, the balance of power has shifted toward a radical civilian leadership with roots in communist ideology. Their attempts to centralize economic policy and dismantle the remaining architecture of the 2001 reforms have provoked open resistance from the entrenched Kemalist technocratic elite, particularly within the Central Bank, Treasury, judiciary, and the upper echelons of the civil service. This institutional bifurcation has created a dual power structure, effectively paralyzing policy. The communist bloc seeks to expand price controls, renationalize utilities, and impose restrictions on foreign capital, while technocratic institutions continue to issue public warnings and have slowed implementation through bureaucratic inertia or outright sabotage. Compounding this is an ongoing wave of street protests across Ankara, Istanbul, and Izmir, organized by university students, trade unions, and pro-democracy Kemalist factions. The situation has grown increasingly volatile, with several reports of state security forces clashing with demonstrators and key urban centers entering a state of de facto curfew. 3. Investment Outlook: Foreign Direct Investment (FDI): Net FDI inflows have declined 62% YoY, with major European and Gulf-based investors withdrawing or freezing planned infrastructure and energy projects. The judiciary’s abrupt move to seize assets owned by foreign firms alleged to be "undermining the economic sovereignty of the Republic" has further chilled appetite for long-term commitments. Portfolio Capital Flight: The Istanbul Stock Exchange has lost 44% of its value year-to-date. Government bond spreads over U.S. Treasuries have widened to 950 basis points, pricing in default risk. Anecdotal evidence from institutional clients suggests that capital flight is underway at a scale not seen since Russian Economic Crisis of 1998, with domestic elites quietly moving assets to Switzerland, Warsaw, and the UAE. 4. Structural and Sovereign Risk: The sovereign debt burden remains manageable on paper (~60% of GDP), but the rapid devaluation of the lira and collapse in tax receipts place its sustainability in question. Markets are beginning to price in the possibility of a selective default or restructuring, especially if the government continues to alienate multilateral lenders. Turkiye is no longer seen as a stable emerging market. Rather, it is increasingly viewed by institutional investors as a politically unstable, semi-authoritarian middle-income country with unreliable fiscal governance and a contested monetary authority. Such an assessment was made by Türkiye's largest and most respected financial institution Anadolu Finansal Hizmetler A.Ş. which urged its clients to consider relocating their liquid assets abroad. 5. Policy Recommendations: The situation in Turkey is no longer a standard emerging market liquidity crisis but a full-spectrum sovereign trust failure with political, legal, and monetary systems unraveling. Remedies cannot be restricted to orthodox monetary tightening or fiscal consolidation. What is required is a cohesive statecraft-driven re-legitimization of the Turkish regulatory and institutional apparatus. To that end, this memorandum outlines a structured, state-led stabilization program, divided into three tiers: (1) monetary and fiscal stabilization; (2) institutional and regulatory recalibration; and (3) political-legal normalization. II. STAGE ONE: MACROECONOMIC STABILIZATION​ A. Monetary Realignment​ Reassert Central Bank Independence via Emergency Decree: Immediate restoration of the 2001 Central Bank Law, including the explicit prohibition on political appointments without parliamentary consent. Establish a temporary Monetary Stability Board co-chaired by the CBRT governor and an international liaison, with veto power over any capital control or interest rate action deemed inflationary. Interest Rate Shock Therapy: A front-loaded interest rate hike to halt inflationary expectations, even at the cost of a short-term credit crunch. Real rates must rise to 5–7% above projected inflation expectations. Simultaneously offer liquidity windows for solvent banks to avoid cascading failures. Managed Float Currency Regime: Formally abandon any pretense of crawling pegs or implicit controls. Allow the lira to float, while building FX reserves via short-term stabilization lending. B. Emergency Fiscal Measures​ Fiscal Freeze Legislation: Impose a six-month moratorium on all new government expenditures outside of salaries and emergency health services. Cease all discretionary spending by ministries and subnational governments. Revenue and Debt Reform: Immediate enactment of an emergency VAT hike (from 18% to 23%) and a temporary wealth tax on assets exceeding 500,000 USD, coupled with incentives for voluntary repatriation of capital. Begin negotiations for a sovereign reprofiling package with the Washington Club and private bondholders. III. STAGE TWO: INSTITUTIONAL AND REGULATORY RESET​ A. Banking Sector Reform Package​ Consolidated Banking Resolution Authority (BRA): Establish a temporary supra-agency modeled on the FDIC (U.S.) or FROB (Spain), empowered to forcibly merge, recapitalize, or liquidate systemically important financial institutions. Publicly list "Tier I" banks with solvency guarantees, "Tier II" under review, and "Tier III" under resolution. Capital Controls with Conditions: Introduce temporary outflow controls, focused on speculative short-term capital, but guarantee repatriation rights for FDI and medium-term bondholders. Must be time-bound, transparent, and IMF-verified. Full Audit of State Banks: Commission independent forensic audits of Halkbank, Ziraat, and VakıfBank to assess politically directed loans, NPL ratios, and compliance failures. B. Legal and Regulatory Cleanse​ Restore Judicial Autonomy in Commercial Law: Repeal all decrees that permitted expropriatory rulings or “economic sovereignty” exceptions to commercial contract enforcement. Invite EU commercial law observers to co-monitor major arbitration cases in Istanbul and Ankara courts for one year. Reinstate Procurement Transparency: Cancel or suspend all state procurement contracts issued since January 2006 pending review under integrity standards. Empower Capital Markets Authority (CMB): Temporarily empower the CMB with supervisory control over stock market trading, corporate disclosure, and insider activity, with a mandate to restore foreign investor trust. IV. MULTILATERAL FRAMEWORK FOR REENGAGEMENT​ A. International-Led "Ankara Compact"​ Propose a three-year IMF Extended Fund Facility (EFF) with conditional disbursements tied to institutional milestones: CBRT autonomy, bank recap, legal reform, and fiscal consolidation. Coordinate with international financial institutions capable of lending: the United States, Poland, Sweden, the United Kingdom, and the Netherlands to anchor real-economy support in employment, urban infrastructure, and education. B. Regional Stabilization Guarantee​ Request the EEF to create a regional backstop facility offering $30–45 billion in standby capital to buffer short-term shocks and reassure investors. CONCLUSION​ Türkiye's crisis is not merely financial, it is existential. It is a failure of institutional trust and constitutional legitimacy, manifesting as a capital collapse. The only remedy is an integrated political and economic stabilization strategy, grounded in transparency, rule of law, and credible transitional governance. The above program is painful—but without it, the republic risks ungovernability, social fracture, and regional contagion. We currently advise extreme caution in all Turkish assets. Exposure to Turkish sovereigns, lira-denominated instruments, and domestic equities should be reduced or hedged. Absent immediate structural reform and international intervention, the Turkish economy is on a trajectory toward deepening crisis, with the risk of spillover into the Balkans and Black Sea regional financial systems.