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Turkish Finance Minister Says Rise in Energy Prices Accelerating Inflation

Turkish Finance Minister Says Rise in Energy Prices Accelerating Inflation

Sunday, 20 March, 2022 - 08:00
A merchant counts Turkish lira banknotes at the Grand Bazaar in Istanbul, Turkey, March 29, 2019. (Reuters)

Turkish Finance Minister Nureddin Nebati said on Saturday the global rise in energy prices was accelerating inflation in the country, but Ankara would continue working to lower it, adding that the lira's recent decline was within "acceptable" levels.

Inflation hit 54 percent in February and economists expect it to continue rising towards 70 percent in coming months, after Russia's invasion of Ukraine sent commodity prices soaring and knocked the lira.

Speaking at a business conference in the southern resort of Antalya, Nebati said a government-backed scheme that protects lira deposits against depreciation had helped eliminate concerns over what he called "attacks" on the lira's exchange rate.

"What we have seen in recent months is that the exchange rate is stable and moves forward within acceptable limits," he said.

The lira is down 11 percent against the dollar this year, mainly due to the economic fallout from Russia's invasion of Ukraine.

The currency had declined 44 percent last year, mostly after a series of rate cuts, long sought by President Tayyip Erdogan, which sparked a currency crisis and sent inflation to a 20-year high.

The lira protection scheme as well as costly forex market interventions by the central bank helped stem the currency crisis in December.

The central bank cut its policy rate by 500 basis points to 14 percent between September and December but has kept it unchanged at the last three meetings.

Erdogan's new economic plan prioritizes a current account surplus, exports, credit, and growth, while keeping interest rates low.

However, Russia's actions in Ukraine, which it terms a "special operation", risk widening Turkey's current account deficit, due to rises in commodity prices and a potential decline in tourism revenue.

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