UPDATES WITH ADDITIONAL COMMENTS FROM PRESIDENT
By Ovunc Kutlu
ANKARA (AA) – To continue keeping its promise of protecting the Turkish public from the high cost of living, the nation’s president announced new measures on Monday.
No Turkish citizen will have to move their savings from the Turkish lira to foreign currency, declared Recep Tayyip Erdogan after chairing a Cabinet meeting in the capital Ankara.
The government is presenting a new financial alternative for citizens' savings to soothe their worries over rising exchange rates, said Erdogan.
"For exporting companies that find it difficult to present prices due to fluctuations in foreign exchange rates, they will be given an exchange rate future through the Central Bank," he explained.
He also said stoppage (deductions) on companies' dividend payments will also be lowered to 10%.
The state subsidy rate on the personal pension system will be raised significantly from 5% to 30% in order to boost its appeal, he said.
- Lira gains ground
Erdogan’s remarks seemed to be welcomed by the Turkish lira, as afterwards it gained strength against the US dollar, improving from its daily high of 18.41 to 14.74 at 1821GMT, but the parity later rose to 16.43 at 1834GMT.
The new measures come in the wake of rising prices and soaring exchange rates as the government pursues its “new economic model,” which stresses opposition to high interest.
Government officials say the exchange rates ignore Turkey’s strong economic fundamentals and have blamed high prices on hoarders and global factors. The benefits of Turkey’s new approach will become clear in the next three to six months, according to Erdogan.
Erdogan also said there will be a new instrument to help people who might invest in foreign exchange get the same results while sticking to the Turkish lira.
"Investors will be encouraged to move towards Turkish lira-based assets by issuance of government bills that are indexed to public economic enterprise revenues that are transferred to the budget," he explained.
- From mattress to markets
On what he calls the "under-the mattress savings" of people who withdraw their assets from Turkish banks and keep them at home, Erdogan also said these would come back into the economy.
"There are five tons of gold with a total worth of $280 billion under the mattress. New instruments will be developed with market participants in order to incorporate this into the economy," he said.
Erdogan said high inflation in Turkey will decline in a few months thanks to the Central Bank’s interest rate cuts – in line with his oft-repeated mantra: “Interest rates are the reason, inflation is the result.”
"Turkey does not have any intention, nor the need, to step back from the free market economy or foreign exchange regime," he said, hitting back at baseless rumors the government has condemned.
"This country will no longer be a haven for those who gain more money with high interest rates, nor a haven for imports," he added.
Erdogan stressed that he would not allow any steps that would lead to lower investment, employment, production, or exports.
"Turkey will no longer be a country that will mortgage its economy and politics to the outside through IMF programs," he said.
Erdogan called for all investors who have money and access to finance to invest and produce in Turkey, saying: "Now is exactly the time to move if Turkey is to climb the economic ladder."