IMF published its report on Türkiye within the scope of its Financial Transparency Assessment. In the IMF report, it was stated that Türkiye's reforms in the field of financial transparency include steps such as the transition to the program budget in 2021, the implementation of accrual-based International Public Sector Accounting Standards and the continuous improvement of State Financial Statistics reporting.
The report noted that reporting on public enterprises had improved, and it was stated that the budget was presented on an integrated basis and most of the public expenditures were included in the budget documents.
The report stated that the government started to publish a citizens' budget in 2017 and implemented an additional budget for expenditures that significantly exceeded the initial budget appropriations in 2022, and noted that these developments were built on decades of progress.
IMF stated that in the last evaluation, Türkiye met the level of good or advanced practice in approximately two-thirds of the Fiscal Transparency Code principles, and that this rate was approximately half in the evaluation in 2015. It was stated that "The evaluation level of approximately one-third of the Fiscal Transparency Code principles has been increased since 2015."
It was noted that almost all financial and non-financial assets, as well as liabilities at the general management level, were included in the reporting scope, but liabilities related to the public pension system were excluded from the scope.
LIMITED PROGRESS IN FINANCIAL RISK MANAGEMENT
The report noted that financial risk management remains the most challenging area of financial transparency for Türkiye and that only limited progress has been made in this regard in the last 10 years. It was emphasized that assessments of macroeconomic risks were limited to high-level sensitivity analyses, and a single summary report bringing all financial risks together has not yet been published.
It was stated that the rapid aging of the population in Türkiye necessitates long-term financial sustainability analyses, but these analyzes do not yet exist. On the other hand, it was stated that reporting on guarantees related to public debts and public-private sector cooperation projects is of high quality, risks related to the financial sector are fully disclosed, and environmental risks, especially related to earthquakes, are managed in line with a well-developed strategy.
PROBLEMS IN REPORTING EARTHQUAKE EXPENDITURES
The IMF pointed out that Türkiye's systematic financial reporting structure sometimes creates critical gaps in the understanding of public finance. The report stated that some deficiencies are critical from a macroeconomic perspective, that they lead to a lowering of the evaluation level of two indicators within the scope of the Fiscal Transparency Code and pose the risk of the financial situation not being sufficiently transparent.
The report stated that there were problems regarding the timing of reconstruction expenditures related to the 2023 earthquakes, and noted that according to government reports, earthquake-related expenditures corresponded to 3.6 percent of GDP in 2023, 1.7 percent in 2024 and 0.8 percent in 2025. The report said:
"While these figures are accurate in terms of appropriations, in terms of actual expenditures they understate expenditures in the early years significantly and expenditures in later years. This has corresponding effects on budget deficits. Only 0.8 percent of the expenditure of 3.6 percent of GDP reported for 2023 has actually been carried out."
KKM'S COST REACHED 4.2 PERCENT OF GDP
The report stated that reporting on debt guarantees is comprehensive, clear and useful, but in recent years, budget documents have not included information about the government's guarantees on Exchange Rate Protected Deposit accounts.
The report stated that with the KKM application, the government assumed an exchange rate risk of up to 8 percent of GDP in Turkish lira deposits indexed to foreign currency, and the following evaluation was made:
"The sharp depreciation of the exchange rate ultimately imposed a cost on the state corresponding to 4.2 percent of GDP. While a part of this cost was covered by the budget, a part of it was reflected in the losses of the Central Bank and caused the bank's equity to decline to a negative level of 2.9 percent of GDP. The KKM practice is being phased out. However, this practice constitutes a striking example of how unorthodox policies can turn significant financial risks into actual liabilities."
TOKİ'S FINANCIAL STATEMENTS ARE NOT OPEN TO THE PUBLIC
In the IMF report, it was noted that the Public Enterprises Report was generally of high quality, but did not include financial information of the Mass Housing Administration (TOKİ), one of the most important public enterprises. It was noted that TOKİ's own financial statements are not publicly available and that it received a qualified opinion during the audit of the Court of Accounts.
The report stated that TOKİ's assets correspond to 2.6 percent of the GDP and stated, "The institution's subsidiaries are among the main recipients of post-earthquake reconstruction expenditures. TOKİ also receives a significant amount of land transferred free of charge from the state in order to finance social housing projects. In addition, TOKİ has also received budget transfers of significant amounts since 2023."
LACK OF TRANSPARENCY IN Türkiye WEALTH FUND
In the report, it was stated that there are public assets worth 29 percent of GDP within the Türkiye Wealth Fund, but the transparency accompanying this size remains limited. The report noted the following:
"This significant part of the balance sheet size is not included in any financial reports and only limited information is provided to the public. Although the fund states that it complies with the Santiago Principles on the governance of sovereign wealth funds, accessible financial information is limited. This information consists of activity reports and unaudited financial statements that do not contain footnotes. Audit reports are disclosed to the public domestically; there is no clarity about the nature of the fund's assets and liabilities and its relations with the government. These problems are of critical macroeconomic importance due to their size."
FOUR PRIORITY RECOMMENDATIONS FROM IMF
The IMF presented four priority recommendations to improve financial transparency in order to address the problems identified in the report.
Firstly, it was proposed to expand State Financial Statistics reporting to cover the entire public sector and to prepare consolidated income statements and balance sheets including the general administration, all public enterprises including TOKİ and the Turkey Wealth Fund. It was stated that earthquake expenditures should be reported in the years in which they were actually incurred, both in terms of capital transfers of the government and final reconstruction expenditures made by TOKİ and related parties.
Secondly, it was recommended to prepare an annual financial statement covering all central government institutions, including ministries, revolving funds and extra-budgetary funds, and to audit this table by the Court of Accounts.
Thirdly, it was stated that the government's financial target should be clearly declared and published in the budget documents and the achievements regarding the target should be reported. It was requested that this obligation be clearly regulated in the Public Financial Management and Control Law.
Fourthly, it was recommended to prepare an annual financial risk report covering long-term risks arising from demographic change, as well as risks arising from macroeconomic developments, guarantees, public-private sector cooperation projects, public enterprises, the financial sector, local governments and natural disasters.
