Macro and Politics

* The Treasury and Finance Ministry will release January cash budget figures @ 17:30 local time. The Treasury’s cash balance posted a deficit of TL333.1bn in December, while the primary balance recorded a deficit of TL216.9bn. As a result, the cumulative Treasury cash deficit reached TL2.1tn in 2025. The central government budget deficit for the full year amounted to TL1.8tn, coming in below the TL2.2tn target set out in the 2026–2028 Medium-Term Program (MTP). The primary balance, meanwhile, posted a surplus of TL255.2bn in 2025. Budget performance relative to the MTP largely reflected revenue outturns exceeding expectations, while the expenditure side has yet to deliver clear signals of broad-based and durable fiscal tightening. The Treasury cash balance data for January, due to be released today, will serve as a leading indicator for the central government budget figures scheduled for release on Monday, 16 February. Our house forecast puts the 2026 budget deficit at TL2.8tn (3.4% of GDP), with risks skewed to the downside. The current picture points to temporary improvements in expenditure composition rather than a structural tightening in the fiscal stance. That said, the trajectory of current and capital expenditures will remain key risk areas in assessing the durability of fiscal discipline going forward.

* Foreign investors recorded net purchases of USD455m in equities and USD721.8mn in government bonds (excluding repo transactions) during the January 23 – 30 period. As a result, the foreign share in the total government bond stock increased from 8.6% to 8.9%, marking the highest level since February 2020. Equity inflows thus extended into a ninth consecutive week, bringing cumulative foreign equity purchases over this period to USD2.9bn. In the bond market, foreign inflows have remained robust since late October, with cumulative foreign purchases reaching USD6.5bn since the week of 31 October, when inflows began to gain momentum. Moreover, during the mentioned week, the residents’ FX deposits retreated by USD2.4bn (excluding gold, EUR/USD parity effect adjusted), while their total FX deposits (including gold, price adjusted) increased by USD1.9bn. In terms of official reserves, the CBT’s gross FX reserves soared by USD2.6bn to USD218.2bn, net international reserves dropped by USD4bn to USD93.2bn and net reserves excluding swaps eased by USD2.9bn to USD82.4bn.