Turkey’s 2026 Interest Bill Set to Hit ₺2.7 Trillion

Türkiye’s growing public debt is set to reach unprecedented levels in 2026, with the Treasury’s projected interest payments soaring to ₺2.74 trillion — nearly double the annual budget of some ministries combined. According to budget data and the Treasury and Finance Ministry’s latest projections, this translates to the state paying an average of ₺7.5 billion per day in interest — or roughly ₺87,000 every second.

Soaring Borrowing Costs Drive Record Interest Burden

The surge stems from rapidly rising public deficits and an expanding need for government borrowing. Despite two years of tight monetary policy, high interest rates during the adjustment period significantly raised the Treasury’s financing costs. Analysts cite the lingering effects of the COVID-19 pandemic, the 2023 earthquake reconstruction, pre-election spending, and early retirement (EYT) reforms as major contributors to the widening deficit.

Economist Naki Bakır, writing for Dünya newspaper, noted that even after nearly two and a half years of monetary tightening, “public financial balances have yet to return to a sustainable path.” The Treasury’s borrowing needs remain high, and the momentum in interest payments is expected to continue through 2026.

Interest Payments Near ₺3 Trillion

According to the 2026 Central Government Budget Proposal submitted to Parliament, total budget expenditures are expected to climb from ₺14.67 trillion in 2025 to ₺18.93 trillion in 2026, a 29% increase.

Within that framework, interest payments, originally forecast at ₺1.95 trillion for 2025, are now projected to reach ₺2.05 trillion this year due to higher borrowing costs. For 2026, that figure is expected to surge 33.6% to ₺2.74 trillion.

By comparison, Türkiye’s official inflation target for 2026 is just 16%, meaning that the real increase in interest payments — adjusted for inflation — is around 15%, reflecting a genuine rise in the cost of debt servicing.

If borrowing needs continue to expand or refinancing costs rise further, the interest bill could exceed ₺3 trillion, economists warn.

Debt-Fueled Deficit and Crowding-Out Effect

The Treasury’s cash deficit reached ₺1.73 trillion in the first nine months of 2025. To cover this gap, the government relied heavily on domestic borrowing, raising ₺2.34 trillion net, of which ₺2.16 trillion came from internal debt instruments.

Despite the Central Bank’s policy rate cut from 50% to 40.5%, the Treasury’s borrowing costs remain high. The average yield on zero-coupon bonds fell slightly from 45.25% to 40.51%, while fixed-rate notes rose from 36.65% to 39.47%, underscoring persistently expensive credit conditions.

With the 2026 inflation target still at 16%, the Treasury continues to borrow at real positive rates, reflecting investor demand for higher yields amid uncertainty. Economists warn that as the government absorbs a larger share of available funds, a “crowding-out effect” is emerging — where public borrowing squeezes out private investment, slows job creation, and worsens income inequality.

2026: Highest Interest Share in 16 Years

Based on current projections, Türkiye’s 2026 interest burden will consume:

• 14.5% of total budget spending,

• 19.9% of total tax revenues, and

• 16.9% of total government income.

This means that the state will spend ₺20 out of every ₺100 in tax revenue solely on interest payments — marking the highest ratio in 16 years. The previous record was set in 2010, when interest absorbed 22.9% of tax income.

Breaking down the daily figures:

• Monthly interest payments: ₺228.5 billion

• Daily: ₺7.5 billion

• Hourly: ₺313 million

• Per minute: ₺5.2 million

• Per second: ₺87,000

Public Debt Nears ₺13 Trillion

Türkiye’s total central government debt stock has surged to ₺12.96 trillion as of September 2025, representing a 40% increase (₺3.7 trillion) in just nine months. Of this total:

• ₺7.59 trillion is domestic debt,

• ₺5.37 trillion (in lira equivalent) is external debt.

Notably, foreign currency-linked debt now accounts for over 53% of the total stock, making the Treasury vulnerable to exchange-rate shocks and global interest rate shifts.

Economists caution that this debt composition leaves Türkiye’s fiscal stability exposed to external volatility, particularly if global rates rise again or the lira weakens further.

A Warning for 2026 and Beyond

The rising debt burden highlights a central dilemma for policymakers: while fiscal tightening is necessary to reduce deficits, high borrowing costs are eroding the very savings such measures aim to achieve. Unless growth accelerates and inflation stabilizes, the Treasury’s interest bill could continue climbing — tightening the squeeze on social spending and investment.

With interest payments approaching ₺3 trillion and debt stock nearing ₺13 trillion, 2026 could mark one of the costliest years in Türkiye’s modern fiscal history, underscoring the steep price of prolonged borrowing and delayed structural reform.