Turkey must put stability first, not cheap credit - columnist

Financial stability is more important for economic growth than low interest rates – past experience proves that argument, writes Turkish columnist İbrahim Kahveci.

The government should also ensure stability along with progress on democracy and long-overdue legislative reforms in areas such as the labour market and taxation, Kahveci said in an article for pro-government Karar. The state of emergency, in place since last year’s failed coup, should also be lifted to encourage investment, he said.

Kahveci pointed to the years 2004, 2005 and 2006, when the economy was growing at more than 7 percent but interest rates were as high as 27 percent. In 2006, the central bank reacted to market developments and raised its key lending rate from 16.25 percent to 22.5 percent in two months. Yet the economy grew 7.1 percent that year, he said.

“Let’s not fear taking courageous steps. But let’s also not forget that we need to implement real economic reforms quickly. Let’s reduce the cost of public goods, start reducing taxes and open the way to private sector investment financing.”