May 17 2018

Turkey in election mode cuts fuel tax to offset lira drop

Turkey’s government, preparing to fight elections next month, will cut taxes on fuel to offset increases in international oil prices and the lira’s decline against the dollar.

The decision was made by a cabinet decree, BloombergHT reported on Thursday. Such decrees are levied by the government under a state of emergency in place since an attempted coup in July 2016.

The lira has slid to record lows against the dollar, making imports more expensive. Turkish fuel prices are traditionally set automatically according to fluctuations in the price of oil and gasoline. Turkish President Recep Tayyip Erdogan and his governing party have called snap general elections for June 24 citing economic factors and the war in neighbouring Syria.

The tax reductions will apply to unleaded fuel, diesel, liquid petroleum gas, propane and butane, the television channel reported on its website.

The lira dropped to a record 4.5 per dollar on Wednesday amid a general rout in emerging markets and on concern government stimulus measures are overheating the economy. The lira strengthened later in the day after an announcement that central bank officials would meet with the government, raising speculation among investors that rate hikes were imminent.

The lira fell 0.8 percent to 4.45 per dollar at 10:09 a.m. on Thursday after no rate hike was forthcoming.