Turkey’s Finance Minister Nureddin Nebati has said a controversial economic model implemented by the Turkish government based on low interest rates benefits manufacturers and exporters but not low-income families, according to a journalist.
Nebati, who made a presentation at a meeting of the ruling Justice and Development Party (AKP) in Ankara over the weekend about Turkey’s inflation and 2023 goals, was quoted by journalist Abdülkadir Selvi from the pro-government Hürriyet daily as saying that the government could have increased interest rates to strengthen the value of the Turkish lira against foreign currencies but that this would have negatively affected production.
“We were at a crossroads. We preferred growth in addition to high inflation. Otherwise, we could have taken drastic measures to lower inflation. We could have increased interest rates. But in that case, production would have come to a halt. By adopting the scheme foreseeing the switching of foreign-exchange deposits into exchange-rate-protected Turkish lira deposits, we put a brake on dollarization. We chose production and growth. Manufacturers and exporters are profiting from this system, although low-income families are not,” Nebati was quoted as saying.
Recent increases in food and utility prices continue to cripple the purchasing power of Turks as yearly inflation reached a record level of 73.5 percent in May, up from 69.9 percent in April, the highest level of inflation since 1998.
Critics blame the country’s economic woes on President Recep Tayyip Erdoğan’s unorthodox economic policy of pushing for lower interest rates to combat price rises.
The central bank refused again last month to raise its main rate, keeping it at 14 percent.
Soaring food and energy prices pushed inflation even higher last month.
Transport prices jumped by 107.6 percent in May, while food was up 91.6 percent.
Rumors of a military invasion of northern Syria further hit the value of the Turkish lira, which was at 16.49 to the dollar on Friday. The currency has lost nearly 48 percent in value over the past year.
With elections looming in June 2023, the opposition and many economists have accused the national statistics agency of deliberately underestimating the magnitude of inflation.
The Inflation Research Group, made up of independent Turkish economists, said Friday that inflation actually accelerated by a whopping 160.8 percent, more than twice the official figure.