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Dec 08 2018

We will all swallow bitter pill if needed, says Turkish finance minister - report

Turkish Treasury and Finance Minister Berat Albayrak said on Friday he expects lower interest rates in Turkey as inflation slows and that all institutions should take responsibility in case a bitter pill had to be swallowed for cutting state expenditures. 

Albayrak was speaking in behind-closed-doors meetings to deputies of the ruling Justice and Development Party (AKP), who quizzed the minister about inflation, credit problems for small and medium-sized enterprises, company closures and excessive power price bills, Bloomberg HT said.

“We are making the necessary preparations against future attacks on our economy,” Albayrak said, according to Sabah. “You will see a reduction in interest rates in the coming months. Rates have come down to these levels by pressuring banks. But they are still very high.”

Albayrak said that the ministries should decide on how to prioritise among different projects and measures. “We all will assume responsibility, if a bitter pill has to be swallowed. For example, I am taking the necessary steps in my ministry. We limited the number of people sent to posts abroad,” he said.

Turkish banks have hiked interest rates on loans and pared back on lending after a currency crisis earlier this year sent inflation to more than 25 percent and prompted the central bank to raise its own benchmark interest rate to 24 percent. Inflation slowed to 22.6 percent in November and trates on some loans have declined as a consequence.

“They (banks) are looking at profitability," Albayrak said. "We have taken the necessary steps to bring down inflation and we’ll continue to do so.”

The best deals on loans for SMEs of 100,000 liras ($18,691) over three years typically carry interest rates of between 2 percent and 3 percent monthly, according to loan supermarket hangikredi.com. That equates to a compounded rate of approximately 24.3 percent to 38.4 percent annually, excluding other charges. Monthly rates for equivalent consumer loans start at 2.4 percent.