Turkish President Recep Tayyip Erdogan said he intends to
tighten his grip on the economy and take more responsibility for monetary
policy if he wins an election next month.
With the Turkish lira at a record low against the dollar and down
this year against all 17 major currencies tracked by Bloomberg, Erdogan told
Bloomberg TV in London on Monday that after the vote transforms Turkey into a
full presidential system, he expects the central bank will have to heed his
calls for lower interest rates. The central bank’s key rate is now 13.5
percent, compared with 10.9 percent consumer-price inflation.
“When the people fall into difficulties because of monetary policies,
who are they going to hold accountable?” the 64-year-old president said in the
interview. “They’ll hold the president accountable. Since they’ll ask the
president about it, we have to give off the image of a president who’s
influential on monetary policies.”
That “may make some uncomfortable,” he said. “But we have to do it.
Because it’s those who rule the state who are accountable to the citizens.”
The lira slid to its weakest level ever against the dollar after his remarks
were published, losing 0.6 percent to 4.3942 at 7:32 a.m. Istanbul time.
Erdogan last month called snap elections for June 24, when a victory
would consolidate his one-man rule of a country he’s governed since 2003. Since
defeating a coup attempt in 2016, Erdogan has used emergency rule to increase
his control over the region’s largest economy. A referendum last year weakened
the role of parliament and gave the president sweeping authority in the most
radical constitutional overhaul since the republic was founded 95 years
ago.
“From the moment we move to a presidential governing system, our
effectiveness there will be very different,” he said. “We’re going to do
this so we can be held accountable for the responsibility we’ve taken.”
The one-time Islamist firebrand, who was jailed on charges of inciting
hatred in 1999, was in London meeting with executives, bankers and investors
amid a sense of mounting crisis in Turkey’s economy. He’ll meet U.K. Prime
Minister Theresa May and Queen Elizabeth II later on
Tuesday.
The outreach comes as Turkey’s relations with its NATO allies fray and
its diplomatic focus shifts toward Russia and Iran. The country faces the
unprecedented risk of sanctions from the U.S., a risk that Erdogan
downplayed.
“We can’t cut off our ties with Russia,” he said in response to
whether he was prepared for U.S. sanctions should he consummate the purchase of
a missile defense system from Vladimir Putin’s government. “If we’re
allies with the U.S., we need solidarity, not sanctions.”
The rapidity of the changes to Turkey’s economic and foreign policies
has shaken investor confidence, which is critical because Turkey’s
current-account deficit demands steady inflows from abroad. The shortfall in
the first quarter of this year was more than $16 billion, almost double the
same period last year.
Erdogan has routinely criticized the central bank for setting interest
rates that he says have helped stoke rising prices, an argument that
contradicts conventional economic theory. Central bank governor Murat
Cetinkaya has said higher borrowing costs would help anchor the currency,
a view in line with orthodoxy.
on his view of interest rates, Erdogan said that cutting them would
bring lower inflation because borrowing costs would decline.
“Of course our central bank is independent,” Erdogan said. “But the central
bank can’t take this independence and set aside the signals given by the
president, who’s the head of the executive. It will make its evaluations
according to this, take its steps according to this. And I believe this will
result in very beneficial steps in the future.”
Source: bloomberg