Turkey’s Treasury Faces Intense Start to the Year, Relief Expected in 2026

Turkey’s Treasury and Finance Ministry is preparing for a demanding start to the new year as debt repayments scheduled for January and February exceed 1.2 trillion Turkish lira. The scale and composition of these repayments underscore the financial pressure on public finances, particularly due to inflation-linked bonds, while analysts suggest that conditions may gradually ease in 2026, with an improving domestic debt rollover ratio.

As the final months of the year converge with the opening of the next, the Treasury has planned an intensive domestic borrowing strategy to manage these obligations. According to official projections, the period from December through February is one of the most concentrated periods for debt servicing in recent years.

Domestic Debt Payments Dominate the Outlook

Data shows that between December and February, the Treasury is expected to repay approximately 1.34 trillion TL in domestic debt. Against this figure, nearly 1.25 trillion TL in new domestic borrowing is planned. Of the total domestic debt repayments, around 663 billion TL will consist of principal payments, while interest payments will amount to roughly 674 billion TL. In addition, external debt repayments are projected to amount to about 267 billion TL in Turkish lira terms.

These figures highlight how interest costs, particularly those associated with inflation-indexed bonds, have become a central factor in the Treasury’s cash flow dynamics. Bonds indexed to the consumer price index (CPI) typically involve annual interest payments, and the timing of these payments has significantly increased the burden in the early months of the year.

Nearly Full Rollover Ratio Signals Tight Conditions

An analysis by Gedik Investment Research Analyst Burak Pırlanta indicates that the Treasury’s planned domestic borrowing of around 1.25 trillion TL during this period corresponds to an internal debt rollover ratio close to 99%. This suggests that nearly all maturing domestic debt will be refinanced through new borrowing, leaving little room for net repayment.

Within this framework, net domestic borrowing—defined as new bond issuance beyond repayments—is estimated at approximately 587 billion TL. This substantial figure reflects the scale of financing needs arising not only from domestic redemptions but also from external debt obligations that must be covered through internal resources.

January and February Stand Out as Peak Months

The Treasury’s repayment calendar points to particularly heavy monthly obligations in January and February 2026, with domestic debt repayments exceeding 600 billion TL per month. The drivers behind this concentration are twofold: elevated interest expenses totaling around 564 billion TL and sizable principal repayments amounting to roughly 663 billion TL.

A large share of the interest burden stems from CPI-linked bonds whose annual coupon payments fall due during this window. As a result, interest payments in the first two months of the year are disproportionately high compared with other periods, pushing total domestic debt servicing for January and February alone to approximately 1.2269 trillion TL.

Compared with November and December, this sharp increase underscores how front-loaded the Treasury’s repayment schedule has become at the start of the year.

Borrowing Patterns Reflect Broader Financing Strategy

Pırlanta’s analysis also notes a significant rise in planned market borrowing during the first two months of the year, with total borrowing expected to exceed 1.12 trillion TL in that period. The domestic debt rollover ratio for January–February is projected at around 91.7%, lower than the near-100% figure seen when including December, but still indicative of heavy refinancing activity.

Looking at the broader picture, the contrast with earlier months is striking. Between January and November, the Treasury repaid roughly 2.4 trillion TL in domestic debt while borrowing close to 3.3 trillion TL, exceeding initial plans by approximately 136 billion TL. This resulted in a domestic debt rollover ratio of 136.7% for the first eleven months of the year, signaling aggressive borrowing to meet financing needs.

On the external side, the Treasury repaid close to 20 billion US dollars in foreign debt during the same period, while external borrowing stood at around 13 billion dollars. When changes in the foreign currency cash position are taken into account, this suggests that part of domestic borrowing has effectively been used to cover external debt repayments.

Outlook: Gradual Improvement Expected in 2026

Despite the challenging near-term picture, analysts point to a more manageable outlook for 2026. According to the Treasury’s debt repayment projections through October 2026, domestic debt repayments between November 2025 and October 2026 are expected to total approximately 4.4 trillion TL. Given the continued issuance of short-term bonds, this figure could potentially be exceeded.

During the same period, projected external debt repayments are expected to surpass 22.5 billion dollars, reinforcing the likelihood that domestic borrowing will continue to play a role in financing foreign obligations.

The Treasury’s 2026 financing program, released in October, foresees total domestic borrowing of approximately 5.0 trillion TL, translating into an average monthly borrowing requirement of around 400–420 billion TL. For the full year, planned domestic borrowing slightly exceeds 5.3 trillion TL, implying an internal debt rollover ratio of roughly 106%.

While Pırlanta’s analysis allows for potential deviations toward the 110–115% range, this would still represent a significant improvement compared with the roughly 136% rollover ratio observed in 2025. Such a shift would indicate easing pressure on domestic debt dynamics, even if borrowing needs remain structurally high.

Balancing Heavy Obligations With Medium-Term Stability

The data suggests that Turkey’s Treasury is entering the new year under considerable strain, driven by concentrated repayments and high interest costs. However, forward-looking projections also indicate a gradual normalization of debt rollover ratios in 2026. Whether this improvement materializes as planned will depend on inflation trends, borrowing costs, and broader macroeconomic conditions.

For now, the opening months of the year stand out as a critical test of debt management capacity, with the promise of relative relief further down the road.