Macro and Politics

*Following the sharp rise in oil prices triggered by escalating US–Iran tensions, a Presidential Decree published in the Official Gazette introduced revisions to the échelle mobile tax mechanism applied to gasoline, diesel and LPG products. Under the new framework, if increases in international oil prices or exchange rates lead to a rise in domestic refinery gate prices, the Special Consumption Tax (SCT) applied to fuel products may be reduced by up to 75% of the corresponding increase. Conversely, if refinery gate prices decline due to falling oil prices or exchange rates, SCT rates may be increased by up to 75% of the corresponding decrease. As part of the regulation, domestic refinery gate prices—forming the basis of retail fuel prices announced by the Energy Market Regulatory Authority (EPDK)—will serve as the reference starting from March 2, 2026. However, any upward adjustment in SCT will be capped at the SCT levels in effect as of March 2, 2026. Under the previous framework, the échelle mobile mechanism, designed to limit the pass-through of fuel price increases to pump prices, could be utilized in full. The new regulation effectively caps this adjustment at 75%. Currently, the SCT ceiling stands at TL13.90 per liter for diesel and TL14.82 per liter for gasoline.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of February 20 – 27 @ 14:30 local time. Based on our calculations derived from the CBT’s analytical balance sheet, we estimate that gross FX reserves increased by USD4.4bn to USD210.6bn during the week of February 20 – 27. We expect the official figures to broadly confirm our estimates. To recall the previous week’s data: Foreign investors were net buyers of equities to the tune of USD410mn in the week of 13–20 February, while recording net sales of USD991.4mn in the bond market (excluding repo transactions). As a result, the foreign share in the total government bond stock declined from 9.2% to 9.0%. Moreover, during the mentioned week, the residents’ FX deposits retreated by a mere USD68mn (excluding gold, EUR/USD parity effect adjusted), while their total FX deposits (including gold, price adjusted) soared by USD907mn. In terms of official reserves, the CBT’s gross FX reserves slid by USD5.7bn to USD206.2bn, net international reserves dropped by USD6.7bn to USD89bn and net reserves excluding swaps slumped by USD5.9bn to USD75.4bn.

*The real effective exchange rate (REER) increased in February, rising from 102.15 to 103.2 and pointing to a 1% real appreciation of the Turkish lira. The move was largely driven by domestic CPI inflation outpacing the increase in the nominal exchange rate. As a result, the Turkish lira posted a second consecutive month of real appreciation against the equally weighted currency basket, bringing the cumulative real appreciation to 4.2% in the first two months of the year.