Turkey’s inflation rate soars to almost 70 percent

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Turkey’s official inflation rate has soared to nearly 70 percent in April, posing a major challenge to President Recep Tayyip Erdogan, whose unconventional economic policies are often blamed for economic turmoil.

The consumer price index rose 69.97 percent year-on-year in April compared with 61.14 percent in March, the national statistics agency said on Thursday.

Erdogan insists that a sharp cut in interest rates is needed to bring down soaring consumer prices, confronting economic orthodoxy.

The collapse of the lira has pushed up the cost of energy imports and foreign investors are now turning away from once promising emerging markets.

Russia’s invasion of Ukraine and the coronavirus pandemic have exacerbated spikes in energy prices and production bottlenecks.

Analysts say Turkey’s annual inflation rate, the highest since Erdogan’s ruling AK Party seized power in 2002, is largely linked to its unconventional economic thinking.

Erdogan has pressured the nominally independent central bank to start cutting interest rates.

In April, the bank kept its benchmark interest rate steady for the fourth month in a row, subject to pressure despite high inflation.

The biggest price increase in April occurred in the transportation sector by 105.9 percent, while the price of food and non-alcoholic beverages jumped 89.1 percent.

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‘Momentary trend’

Finance and Finance Minister Nureddin Nebati has dismissed concerns, saying on Monday that the current inflation trend is fleeting and “will not spread in the long term and permanently”.

“We will increase the welfare and purchasing power of our citizens from the previous level,” he said.

Turkey has cut taxes on some goods and offered subsidies on some electricity bills to vulnerable households, but this too has failed to stem inflation.

The Turkish currency has lost 44 percent of its value against the dollar last year and more than 11 percent since early January.

Erdogan’s government has responded by using state banks to buy the lira in a bid to cut currency losses.

There is also speculation that the central bank is selling the dollar through a back channel to stem the lira’s decline.

“The central bank is selling $2.5-3bn a week through commercial banks,” a former manager at Turkish state-owned bank Ziraat was quoted as saying this week.

He shared privileged information he received from banking circles, Turkish media reported.

Erdogan, who faces a landmark presidential election next year, has also changed policy to repair broken alliances with cash-rich Gulf states to attract financial support.

Last week, he visited Saudi Arabia in a bid to reset relations since the 2018 killing of Riyadh critic journalist Jamal Khashoggi at the kingdom’s consulate in Istanbul.

Erdogan said his government agreed with Saudi Arabia to “reactivate its great economic potential”.