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Turkish lira in free fall after Erdogan refuses to raise interest rates citing Islamic principles

Turkish President Recep Tayyip Erdogan

Politics and religion must be kept away from monetary management, but Erdonomics–economy driven by Turkish President Recep Tayyip Erdogan's specially curated Islamic principles–follows another track. The already battered Turkish lira plunged further after Erdogan cited religious reasons for continuing with low interest rates, referring to the banking principles of Islam.

He said that his “Muslim faith prevented him from supporting rate hikes,” AFP reported.

Erdogan has come under scrutiny as the country’s currency keeps falling. The lira is now the worst performing currency in the world. On Monday, the lira touched a new low of 17.4 to a dollar.

In January, the lira was valued at around 7.5 to a dollar.

“They complain we keep decreasing the interest rate. Don't expect anything else from me,” he said. “As a Muslim, I will continue doing what our religion tells us. This is the command,” he added.

Also read: Turkey's Central Bank is fast losing credibility following Erdogan's diktat

As economists have blamed Erdogan’s policies and his insistence of continuing with low interest rate even as inflation kept rising, the President seems undeterred. Turkey’s inflation rate in November touched 21.31 per cent.

According to Fitch Ratings, Turkey’s inflation rate could further rise to 25 per cent this month.

“You cannot run a modern economy integrated into the global economy on this basis,” economist Timothy Ash of BlueBay Asset Management said in a note to clients, news agency AFP said.

An analyst told India Narrative that when the country’s central bank is not allowed to operate independently, economic problems are “natural fallouts.”

“The central bank should be allowed to decide on interest rates, if you bring in religion or politics, then there is very little to say,” the analyst said.