ANKARA—Emerging markets need to take steps to attract foreign capital to avoid economic shocks as the U.S. Federal Reserve prepares to raise interest rates, Turkish Deputy Prime Minister Cevdet Yilmaz said Sunday.
Turkey is improving its business environment and working to reduce bureaucratic obstacles as part of structural reforms to attract foreign investments as the Fed plans to its end extraordinary monetary easing, Mr. Yilmaz said at a press briefing after a two-day gathering of finance ministers and central bankers from the Group of 20 industrial and developing nations.
It is unclear how much emerging markets will be effected by the Fed's decision to raise interest rates for the first time in almost a decade, Mr. Yilmaz added.
Developing economies have been relying heavily on cheap money pumped into the world economy by major central banks to counter the global financial crisis, and a reversal of the Fed's quantitative easing now threatens to drain that cash from many countries led by Brazil, India, Indonesia, South Africa and Turkey—the so-called Fragile Five.
"The emerging world is aware of this development, so many countries, including Turkey, are taking steps to increase our attractiveness as a market for global capital," Mr. Yilmaz said.
Turkey's public debt will drop to about 30% of gross domestic product this year, from 33%, Mr. Yilmaz said, touting Ankara's fiscal discipline as an advantage amid the looming Fed interest-rate increase. The central bank in Ankara doesn't necessarily have to resort to interest-rate rises to counter financial volatility as the government pushes ahead with structural reforms to attract global investors, he said.
Amid diverging monetary policies in G-20 nations, structural reforms will become more important, Mr. Yilmaz said. Member nations had delivered on about a third of their reform pledges since last year, but that is not sufficient to meet the G-20 goal of boosting its GDP by 2% by 2018, he added.
Write to Emre Peker at emre.peker@wsj.com
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