Turkey seeks $40 billion in external financing over the next three years, according to the Finance Minister.
Turkey has secured a significant portion of external financing this year, with approximately $7 billion in international development funding, according to recent reports. This funding includes a substantial World Bank-approved package supporting sustainable energy projects, reflecting Turkey’s commitment to green transition and infrastructure modernization.
The country's external financing strategy has been bolstered by additional funding from global lenders. In 2023 and 2024, Turkey secured $17.4 billion in external financing from international institutions.
However, Turkey faces a gap between external debt repayments and new external borrowing. The country repaid nearly $13 billion in external debt from January to July 2025 but secured only about $8.75 billion in new external loans. To cover this shortfall, Turkey has heavily relied on domestic borrowing, with a record domestic borrowing plan exceeding 1.1 trillion Turkish Lira and a domestic debt rollover ratio that surged to 157% as of July.
Despite these challenges, Turkey's economic strategy remains focused on disinflation policies. Finance Minister Mehmet Şimşek has emphasized sustaining the disinflation effort despite risks such as oil prices, tariffs, and food costs. The government maintains spending discipline and is prepared to counter potential inflation shocks. Monetary easing continues, with the central bank cutting interest rates in response to improved inflation expectations, slower economic activity, and stronger foreign exchange reserves thanks to foreign capital inflows.
The Turkish economy expanded by 2% in the first quarter of the year, down from 3% in the previous quarter. However, economic growth is expected to be slightly below the Medium-Term Program target of 4% in 2025. The government acknowledges forecasted budget deficits might rise close to 4% by year-end due to weaker revenue performance but remains committed to fiscal discipline.
Looking ahead, Turkey's economic growth is expected to stabilize, with optimistic medium-term outlooks supported by external financing frameworks targeting over $40 billion in external funding through 2027. The current account deficit is also expected to be lower than medium-term program targets, with a goal of reducing the current account deficit to 2% of GDP by 2025.
In conclusion, Turkey's external financing, domestic borrowing, and monetary-fiscal coordination form the core of its current economic strategy. The country aims to navigate short-term growth moderation and inflation control while pursuing sustainable development and energy transition. Despite potential upside risks to inflation, the disinflation process is progressing steadily and is expected to bring inflation down to single digits by 2027.
- The Turkish government's commitment to sustainable energy and infrastructure modernization is evident in the World Bank-approved package worth billions of dollars.
- Erdogan's government has turned to domestic borrowing extensively, with record domestic borrowing plans and a domestic debt rollover ratio surging beyond 150%.
- Despite the heavy reliance on domestic borrowing, Turkey's economic strategy remains focused on disinflation policies, with the government maintaining spending discipline and countering potential inflation shocks.
- The Turkish economy, despite a Q1 growth slowdown compared to the previous quarter, is expected to secure over $40 billion in external funding by 2027, which should help improve its economic situation.
- The government anticipates that this external funding and fiscal discipline will help reduce Turkey's current account deficit to 2% of GDP by 2025, ensuring a more stable economic future and enabling further investing and business growth.
