Peoples’ Democratic Party (HDP) pointed out that the Central Bank lowering interest rates from 24 percent to 19.75 percent will not solve Turkey’s financial crisis: “We state once again that these steps are ineffective in resolving structural issues with the economy,” said the party.

HDP Economy-politics Working Group issued a written statement and Spokesperson Necdet Ipekyuz said: “Turkey’s Central Bank lowered the interest rates from 24 percent to 19.75 percent after the Monetary Policy Council meeting. This reduction was not unexpected, for three reasons. First, the global economic conjoncture has been signaling monetary expansion in center countries for a while. Second, AKP Leader Erdogan has a mistaken belief about the relationship between interest rates and inflation, so he continues to insist on lowering rates. And third, it was announced by the president himself that the Central Bank’s former head would be removed from office because he was reluctant to lower the rates. As such, this act was not a ‘shocking’ reduction.

The President’s shallow view on the economy, which seems to work on ‘dogma’ more than ‘knowledge’, will be better understood by society when by the end of the year inflation and unemployment show high levels of negative outcomes.

Minister of Finance and Treasury Albayrak said the current deficit goal for 2019 was 80 billion liras, when he announced his New Economic Plan (YEP) last year. In the first six months of the year, this goal has been met! And, this spending includes the 33 billion liras of Central Bank profits that were confiscated with a change in the law. The Treasury’s planned deficit has run out in the first half of the year, and this has necessitated more debt from the market, which has inevitably led to a rise in interest rates. Faced with the situation, the President saw no way out but to confiscate the Central Bank’s contingency reserves. 40 billion liras from the Central Bank contingency reserves were transferred to the Treasury. The resource problem was thus solved (!) and then it was time to lower the interest rates. The Central Bank has now lowered the policy interest by 425 base points.

These steps won’t be sufficient to resolve our economy’s issues, on the contrary, they will be calcified.

As the Peoples’ Democratic Party we state once more that these are temporary steps, aimed to put on a show. They will not aid in resolving the structural issues in the economy.

-One of the biggest structural issues in our country is the extreme inequality of income distribution. These steps will make the matter worse.

-There is monetary expansion as a result of the Central Bank’s profits and contingency reserves being transferred to the Treasury, and this will have a negative effect on inflation.

-The Central Bank’s lowering of interest rates will increase this expansion and in the end, inflation will run off the rails.
-Central Bank’s new head officer Murat Uyar ordering a lowering of interest rates, and in such magnitude, has created even more concern regarding the ‘independence’ of the institution.

As the HDP, we do not accept that the President of the Central Bank is so blatantly not independent. We will continue to defend the autonomy of the Central Bank.

For all these reasons, we see that the government’s decisions will not create the economic relief the people need, and we stress once again that a new constitution is necessary to build a new and democratic administration in the political and economic spheres for the solution.”