Participants urged Turkiye to rebalance its policy mix and use the 2022 budget to cushion the impact of adverse shocks through targeted support to vulnerable households and firms.
The dialogue aims to prepare the Western Balkans and Turkiye for their future participation in the European Semester.
Turkiye submitted its Economic Reform Programme 2022-2024 on January 31 this year. The policy guidance set out in the conclusions of the Economic and Financial Dialogue of 12 July 2021 has been partially implemented.
The participants at the meeting urged Turkiye to increase the share of local currency in new borrowing, reduce the share of public banks holdings in domestic government debt, and expand the tax base by developing a plan to gradually streamline tax exemptions and reductions.
Turkiye was asked to adopt the new framework legislation on public-private partnerships to improve management and monitoring, simplify public procurement procedures, reduce the number of exemptions and phase out the FX value guarantees on lira time deposits as envisaged by the end of 2022 or earlier, according to an EU press release.
It was advised to use all available monetary policy instruments in line with the central bank’s mandate of price stability to ensure a permanent fall in inflation towards the target. Enhance the institutional basis for sustainable price stability in line with operational central bank independence and bolster market confidence.
The meeting encouraged Turkiye to further strengthen the integrity of financial sector regulatory framework in line with international and EU standards, withdraw the regulatory flexibilities provided to the financial sector during the pandemic, particularly with regard to loan restructuring and NPL recognition practices, encourage high quality credit risk management and enhance confidence by conducting more transparent asset quality reviews and publish its methodology and outcomes.
The country was prodded to take steps to set up a domestic carbon pricing and finalise a long-term national energy strategy; improve the transition of young people into the labour market through active labour market measures, better access to education and improvements in the vocational education and training system; incentivise female labour market participation through legislative and fiscal measures and provision of appropriate and affordable childcare infrastructure beyond the big urban centres of the country.
ALCHEMPro News Desk (DS)
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