Erdal Saglam: Şimşek Breaks Silence: High Inflation Is a Legacy of AKP Rule

Erdal Saglam is a veteran Ankara economic correspondent. These are his views,  not  necessarily verified by PA Turkey..

Admission signals deep cracks in AKP’s economic credibility

In a rare departure from previous narratives, Turkey’s Minister of Treasury and Finance Mehmet Şimşek has publicly acknowledged the severity of inflation, stating, “Inflation is now at its highest level in 40 years.” This shift in tone marks a significant departure from the usual government messaging and aligns Şimşek’s remarks with longstanding criticisms from the opposition.

Central Bank Governor Also Admits Delayed Action

Central Bank Governor Fatih Karahan echoed Şimşek’s sentiment, noting that Turkey only began a genuine fight against inflation after the May 2023 general elections. Karahan stressed that success in curbing inflation hinges on institutional credibility and consistent policy—two elements sorely lacking in the years prior.

Both officials now appear to admit what critics have long maintained: inflation was allowed to spiral out of control due to erratic policymaking during previous AKP administrations.

“Even Under AKP, We Needed the IMF for Stability”

In a candid speech to investors, Şimşek reminded listeners that even during his absence from office, inflation had only declined thanks to AKP governments cooperating with the IMF. The implication was clear: without external discipline, AKP’s economic management has repeatedly failed to sustain macroeconomic stability.

Today, Turkey faces a much tougher challenge. Inflation has surged once again—this time without any IMF oversight or structural reform program to anchor expectations.

Government Mentality Now a Barrier to Recovery

Şimşek also pointed to some recent financial improvements, such as:

• A 6-week build-up in Central Bank reserves

• A 90 basis point drop in Turkey’s CDS risk premium

• A modest rebound in capital inflows

He stated that rolling 12-month capital inflows are finally picking up, and that foreign direct investment (FDI) in 2024 has reached $4.7 billion. However, this remains far below the $22 billion peak Turkey achieved in 2007 under the AKP.

Meanwhile, portfolio flows remain highly volatile, and foreign appetite for Turkish real estate is cooling.

“Come Invest Again”—But With What Confidence?

Summing up the current narrative, Şimşek appears to be saying: “Come and invest in Turkey again.” Yet, the call lacks substance. Investors are still wary of the AKP’s erratic policymaking and the concentration of executive power under the Presidential System, which has eroded institutional checks and balances.

Capital Needs More Than Promises

International and domestic investors now require more than political assurances. As global capital flows evolve, investors demand legal certainty, policy consistency, and transparent governance—areas where Turkey continues to fall short.

Even local investors are moving assets abroad. Only speculative short-term “hot money” remains—a fragile foundation for any sustainable recovery.

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