The Turkish lira, which lost another 6% of its value against the dollar, plunged again today after President Recep Tayyip Erdoğan said he would not raise interest rates to stabilise the currency.
Erdoğan is pushing the Central Bank every month to cut interest rates despite inflation, which, according to official figures, has exceeded 21% year-on-year and is likely to reach 30% in the coming months, according to financial analysts.
In a statement broadcast late last night but videotaped on Saturday, the Turkish president invoked the principles of Islam, which bans interest rate hikes, to justify his policies.
“As a Muslim, I will do whatever our religion commands me to do. God willing, inflation will be reduced when possible,” he said.
Erdoğan responded to the call by Turkish businessmen at the end of last week by calling on him to take action to address the crisis.
“The political choices being implemented have not only created new difficulties for the business world, but also for our fellow citizens,” said Tusia, a Turkish employers’ organization that represents about 85% of Turkey’s businessmen and major exporters.
“Therefore, it is urgent to assess the damage done to the economy and return to the economic principles that govern the market economy,” Tusia said in a statement issued by its Washington bureau.
Responding to this appeal, Erdoğan videotaped the statements that were broadcast last night: “They are complaining about the reduction of interest rates, but do not expect anything else from me.”
Since January, the Turkish lira has lost 57% of its value against the dollar, and this collapse translates into an unmanageable price spike as the country is highly dependent on imports, mainly in the field of raw materials and energy.
Commodity prices such as sunflower oil have skyrocketed by 50% in one year.