Inflation and the cost-of-living crisis dominates the agenda in Turkey, ahead of local elections at the end of March. Year-on-year inflation reached 67 per cent in February, according to the Turkish Statistical Institute, breaking a 15-month record and puncturing hopes that high interest rates would put a lid on rapidly increasing prices.
For years, president Recep Tayyip Erdogan was a bitter opponent of high interest rates. ‘Interest rates are the reasons, inflation is the result,’ he roared regularly at political rallies, defying traditional economists. He cites Islamic traditions whereby high interest rates amount to usury, to justify his unorthodox monetary policies.
Erdogan was a bitter opponent of high interest rates
‘Erdogan really seemed to believe in this baseless thesis personally,’ says Hayri Kozanoglu, a Turkish economist. ‘But the Islamic rhetoric was also an excuse to keep interest rates low and boost the economy ahead of the general elections in May 2023.’
The Turkish central bank also burned through all of its foreign currency reserves to artificially keep the Turkish lira afloat.
In the presidential election in May 2023, Erdogan won another five years in office, extending an unbroken rule that began in 2002.
Comments
Join the debate for just $5 for 3 months
Be part of the conversation with other Spectator readers by getting your first three months for $5.
UNLOCK ACCESS Just $5 for 3 monthsAlready a subscriber? Log in