ANKARA: President Recep Tayyip Erdogan on Friday declared that interest rates were the “mother and father of all evil”, a controversial comment that prompted a sharp loss in value of the Turkish lira.

Erdogan, who is campaigning for snap parliamentary and presidential elections on June 24, has repeatedly urged the central bank to cut interest rates to stimulate economic growth.

But economists have cautioned that a tighter monetary policy is needed for an economy whose currency has lost over 12 per cent in value in the last three months and where inflation is running at 10.85pc.

“Interest rates are the mother and father of all evil,” Erdogan said in a televised speech in Ankara. “Interest rates are the cause of inflation.”

Turkey’s late liquidity window (LLW) interest rate stands at 13.5pc after a 75 basis points hike in April.

Noting the extremely low rates in the US, eurozone and Japan, Erdogan added: “We must bring down interest rates.” Erdogan’s statements fly in the face of economic orthodoxy where interest rates are used by central banks around the world as a tool to keep down inflation.

He vowed that in the June 24 elections “I will emerge victorious in the battle with the scourge of interest rates”.

The loss in value of the lira prompted Erdogan to hold an unscheduled meeting of top economic policymakers on Wed­nesday which promised to take the appropriate measures to ensure the health of the economy.

The holding of the meeting prompted a rally in the value of the lira but these gains were largely wiped out after Erdogan’s comments Friday.

The lira was trading at 4.3 to the dollar, a loss of 1.8pc in value on the day.

Erdogan acknowledged that there was an “uneasiness” in the markets but said it was the responsibility of the authorities to take measures.

He added that “we will dispell the pessimistic air that has been deliberately pumped into the markets... and God willing continue on our path with determination.”

The economy has generally been a trump card for Erdogan in his 15 years in power, with the Turkish strongman crediting himself with ending chaos that brought it to near financial meltdown in the 2000-2001 crisis.

But the elections coincide with growing concerns over Turkey’s economic health, notably due to a wide current account deficit and fears the economy is overheating.

Published in Dawn, May 12th, 2018

Opinion

Our exclusivity syndrome
17 Oct 2021

Our exclusivity syndrome

Pakistan needs at least a minimum level of inclusivity that can keep alive democratic values.
Shafqat Kakakhel
Updated 16 Oct 2021

Shafqat Kakakhel

COP26 has to achieve consensus on several issues.

Editorial

17 Oct 2021

Carnage in Kandahar

FOR the second time in a week, carnage has been visited upon Shia worshippers during Friday prayers in Afghanistan....
17 Oct 2021

Sanctity of contracts

PAKISTAN is facing yet another international dispute before the International Centre for Settlement of Investment...
17 Oct 2021

New sports policy

THIS week, the Pakistan Football Federation Normalisation Committee chief Haroon Malik was in Zurich to hold ...
Diminishing freedom
Updated 16 Oct 2021

Diminishing freedom

DESPITE the serious reservations of digital rights activists and tech companies, the federal government has...
16 Oct 2021

Dirty politics

IN her outburst against Prime Minister Imran Khan this week, PML-N leader Maryam Nawaz may not have taken names but...
16 Oct 2021

Decreasing emissions

THE announcement by SAPM on Climate Change Malik Amin Aslam that carbon emissions in the country came down by 9pc...