By John Ikani
Turkey’s troubled Lira nosedived Monday after President Recep Tayyip Erdogan cited Islamic teachings to justify not raising interest rates to cushion the currency against historic falls.
The Lira has lost as much as 45% of its value this year, largely triggered by Mr. Erdogan’s own economic policies, economists and former Turkish officials say.
The crisis has sparked outrage among poor- and middle-class Turks who have made up Mr. Erdogan’s power base.
Turkish citizens have been burning the Lira on the streets amid a surge in inflation. Last month, the inflation rate crossed more than 21 per cent. People have no choice but to line up for subsidised bread.
They are also cutting down on meat, some have even fled the country for a better life in Europe.
Notwithstanding, Erdogan pushed the central bank to sharply lower borrowing costs despite the annual rate of inflation soaring to more than 20 percent.
Economists believe the policy could see consumer price increases reach 30 percent or higher in the coming months.
But Erdogan said in remarks aired by state television that his Muslim faith prevented him from supporting rate hikes.
“They complain we keep decreasing the interest rate. Don’t expect anything else from me,” he said in the televised comments.
“As a Muslim, I will continue doing what our religion tells us. This is the command.”
Islamic teachings forbid Muslims from receiving or charging interest on loaned or borrowed money.
Erdogan has previously cited his religion in explaining why he believes interest rates cause inflation instead of reining it in.
High interest rates are a drag on activity and slow down economic growth.
But central banks raise their policy rates out of necessity when inflation gets out of hand. High interest rates return value to saving money for consumers and make it expensive for companies to invest, thus reducing the demand that often fuels rising prices.
Amid the economic downturn, the Turkish voters are gearing up to get rid of Erdogan in 2023 with the president’s approval ratings fallen to record lows.
According to a survey, just 39 per cent of the Turkish voters want him to continue. Erdogan’s AKP has support from just 26 per cent of the voters.
The national alliance which is a collective of major opposition leaders seems to have got ahead with almost 40 per cent of the voters backing them.
Islam is the go-to defence mechanism for Erdogan. The president brings up religion every time he senses trouble. When the West attacked him, Erdogan declared himself as a leader of the Islamic world and got support from Malaysia and Pakistan.
After he began losing support at home, Erdogan turned the iconic Hagia Sophia museum into a mosque and then the president turned more churches and museums into mosques.
Erdogan fought back criticism with Islam. However, the economy has proved to be his Achilles heel. He is now using religion to defend his policies, however, considering the anger of the Turkish people his strategy is not working.