The Ministry of Treasury and Finance stated that the high interest payment in January was not due to the sudden increase in borrowing costs or interest increases during the program period.
A statement was made by the Ministry regarding interest payments.
In the statement, it was stated that there was a need to make a statement on the evaluations made to the public regarding the interest payments for January recently. “The high interest payment in January is not due to the sudden increase in borrowing costs or the interest increases in the program period. 53 percent of the interest payment made in January consists of the inflation difference paid at the maturity of the CPI-indexed government domestic debt securities (GDDS), which were first issued 10 years ago.” The expression was used.
“REFLECTION OF PAST INFLATION DYNAMICS”
In the statement, it was stated that the feature of CPI-indexed bills is that their coupon rates are low, but the inflation rate realized over the years is added to the principal, and said, “The accumulated inflation difference is paid as a lump sum on the maturity date. Therefore, it is a natural result that the payments for such bonds that mature in periods when inflation is high seem to be temporarily high. Therefore, the increase in January does not indicate a sudden increase in interest rates in the current period, but the reflection of past inflation dynamics on the budget through the maturity structure.” evaluation was made.
In the statement, it was stated that due to the high inflation environment experienced in recent years, there was a temporary increase in interest payments on CPI-indexed debt instruments, and added: “However, this increase is not due to a structural interest burden change, but to the technical and accounting reflection of the inflation accumulated in the past period.” The statement was included.
“THE RATIO OF INTEREST EXPENSES TO NATIONAL INCOME IS PROJECTED TO DECREASE TO 3.5 PERCENT IN 2026”
In the statement, it was pointed out that interest payments are expected to return to more balanced and predictable levels as the gains in the disinflation process become evident, and the following was noted:
“As a matter of fact, the indicators do not indicate a permanent deterioration in the interest burden. The ratio of interest expenses to national income was at an average level of 4.4 percent in the 2002-2025 period. This rate is expected to decrease to 3.5 percent in 2026 and to 3.3 percent at the end of the Medium Term Program (MTP) period. The ratio of interest expenses to tax revenues is 25.9 percent on average in the 2002-2025 period. It is expected to decrease to 19.9 percent in 2026 and to 18.3 percent at the end of the MTP period. The ratio of interest expenditures to central government total expenditures was 17.7 percent on average in the 2002-2025 period, and it is expected to decrease to 14.5 percent in 2026 and to 13.9 percent at the end of the MTP period.
The statement noted that the public borrowing strategy continues to be carried out within a prudent, predictable and sustainable framework, taking into account market conditions, macroeconomic outlook and risk factors, and added: “In this context, the issuance of 10-year CPI-indexed bonds with a maturity of 10 years during the program period has been gradually reduced and the issuance of these bonds has been terminated as of 2024.” The expression was used.
