Turkish central bank may introduce more lending incentives – report

Turkey’s central bank may tweak rules governing banks' required reserves once more in order to increase loans to industries in most need of them, Diken news website reported.

The central bank has been working on a measure to ensure loans reach the right customers, Diken reported, citing statements by Treasury and Finance Minister Berat Albayrak to economists in Istanbul during a five-hour meeting on Monday.

Economists who attended the discussions took Albayrak’s comments to mean that the central bank will adjust banks’ reserve requirements according to which sectors of the economy they lend to, Diken said.

Turkey’s central bank announced last month that banks would be required to set aside fewer reserves of cash at the central bank provided they grew their loans by between 10 percent and 20 percent annually. Some economists criticised the move, saying the bank was pandering to the government’s pro-economic growth agenda at the risk of financial instability.

Turkish President Recep Tayyip Erdoğan replaced the governor of the central bank in July in a step that eroded the institution’s political independence.

Albayrak said he will announce a new economic programme for the country before the end of the month, Diken said. The government plans to cut corporate taxes next year and to increase some income taxes, the website reported.

The government will keep the budget deficit below three percent of economic output this year and then meet the European Union’s so-called Maastricht criteria for the national budget going forward, Diken said, citing Albayrak’s comments.

An economic growth goal of five percent next year, set out by Erdoğan, is achievable, Albayrak said.