there are two opposing bis central bankers ’ speeches developments affecting the ims. on the one hand, the significant reforms since the gfc have strengthened the ims. but on the other hand, growing interconnectedness especially through increased international investment positions together with unconventional monetary policies pose challenges to the ims. in these global circumstances, having faced the deterioration in inflation and its outlook reflecting the pass - through from the tl depreciation and domestic factors and elevated volatility in capital flows together with tightening global financial conditions the central bank of turkey has been following a tight monetary policy to fight inflation, taking liquidity stabilizing measures for the foreign currency market and ensuring the stability of the financial system. this policy framework was announced as a “ road map ” document back in august 2015 outlining monetary policy, foreign currency liquidity and financial stability related measures and aimed at alleviating policy tradeoffs. the key idea is to provide market making facilities to the local banks when they face financial stresses in the global markets. they are then allowed to borrow in foreign currencies from the central bank and use their all liquid assets irrespective of their denominations i. e., local currency and foreign currency denominated assets as collateral when they borrow from the central bank in any currency. bis central bankers ’ speeches

- end inflation may stay above the target in 2008, but within uncertainty band, due to factors outside the control of monetary policy such as energy and food prices. the mid - point of our forecast for 2008 is 5. 5 %, whereas the year - end target is 4 %. however, inflation is forecasted to converge to the target in 2009 and come down to 1. 8 - 5. 5 % range with 70 % probability at the end of 2009. at this point let me say a couple of words about fiscal policy of the last six years and fiscal discipline, which has also contributed much to the macroeconomic stability in turkey. one of the main characteristics of the turkish economy in the 1990s was high budget deficits, which was around 7 % of gdp on the average. during the 2002 - 2007 period setting ambitious primary surplus targets and realizations of these targets, coupled with almost balanced budgets paved the way for significantly improved debt dynamics. even before recent upward revisions in gdp figures, turkey easily met the maastricht criteria for the budget deficit and debt stock. according to most recent data, the ratio of net government debt to gdp has come down to 29 %, whereas budget deficit is less than 2 %. dear guests, as you all know, financial system plays a key role in accumulation of savings and its distribution among productive sectors. therefore, health and stability of a financial system is crucial for economic growth of a country. we attribute utmost importance to financial stability as a country that experienced deep financial crises in the past. price stability is the primary objective of the central bank. but, we also regard financial stability as our auxiliary objective and monitor the system closely. the achievement on the inflation front has significantly improved the macroeconomic environment and eliminated the vulnerabilities that put burden on the proper functioning of the financial system. the banking sector restructuring program and other measures that were taken following the 2001 crisis, led to the formation of a very strong and resilient financial system. this contributed to the high growth rates achieved after the crisis. i can comfortably say that today the banking sector in turkey compares well with those of new members of the european union. the banking law enacted in 2005 is in line with the best international practices. asset size of the turkish banking sector increased by more than three - folds in the last six years and reached usd 500 billion as of 2007. still, there is a huge and unexplored potential in the sector taking into account the size of turkey ’ s