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Sep 14 2018

Turkey will focus on inflation, rates in economic plan

Treasury and Finance Minister Berat Albayrak said Turkey will focus on reining in inflation, dealing with high interest rates on loans and narrowing the current account deficit in an economic plan to be announced on Sept. 20.

The government’s Medium Term Program, which is also designed to ensure sustainable economic growth, includes 35 billion liras ($5.75 billion) of spending cuts and revenue-raising measures to keep the budget deficit under 2 percent of gross domestic product, Albayrak said in comments reported in Sabah newspaper and other local media.

The central bank has ensured a correction in the markets through a hike to interest rates and the government now expects banking sector liquidity to improve and support for the private sector via loans to increase. Extremely high interest rates on credits are “not realistic”, Albayrak said.

The government foresees the upward trend in inflation halting and then heading downwards from October, helped by measures taken in conjunction with banks and state-run enterprises, Albayrak said, adding that discussions would be held with relevent institutions. The government and the private sector will also work to tackle unjust and speculative increases in prices by certain companies and individuals, he said.

The government will also focus on export-led growth and the current account deficit, paying particular attention to “high levels” of imported intermediate goods and ensuring local production of such items, Albayrak said.

The central bank’s increase in interest rates of 625 basis points to 24 percent in a decision on Thursday should now end speculation about its independence, Albayrak said.

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