Turkey ‘saved 442 billion lira’ with low rates

ANKARA - Anadolu Agency

Deputy Prime Minister Ali Babacan adresses public at a rally in Ankara.

The low interest rate environment of the past 11 years has saved Turkey from paying 442 billion Turkish Liras of additional cost, Deputy Prime Minister Ali Babacan has said.

“We [the ruling Justice and Development Party (AKP) government] have lowered interest rate spending and we provide services with the resources yielded from this,” Babacan said during a rally held for Rıza Gezer, AKP’s Etimesgut district candidate in Ankara on March 23.

“We would have had to pay 442 quadrillion [billion in today’s currency] more, if the interest rate hadn’t declined over the past 11 years and the state would have continued to pay 66-percent interest rates,”
he said.

The AKP government has been vocally against high interest rates, which are blamed for hampering economic growth.

Prime Minister Recep Tayyip Erdoğan, who is also keen on maintaining economic growth ahead of an election cycle starting with the local elections on March 30, has been a vociferous opponent of higher borrowing costs, rallying against what he describes as an “interest rate lobby” of speculators seeking to stifle growth and undermine the economy.

The abundant liquidity environment that is supported by the United States Federal Reserve’s bond purchasing program and investors’ interest in emerging markets after the 2008 global crisis made the low interest rate policy sustainable. However, the analyst and the economy policy shapers of the government have been saying this era has come to an end with the Fed’s announcement of decision to cut its bond-buying that led to a huge emerging market sell-off. After resisting for months, the Central Bank of Turkey also hiked all of its key interest rates at the end of January.