Turkish Poor Pay Highest Price of President’s Economic Experiment

In cutting interest rates amid spiralling inflation, the Turkish government under President Erdogan has thrown economic orthodoxy out the window. The poor face getting poorer.

Recep Tayyip Erdogan’s plan to turn around the Turkish economy has a new victim in Finance Minister Lutfi Elvan, who resigned on December 2. But he won’t be the last. The country’s poorest face paying the biggest price of a policy that flies in the face of economic orthodoxy, experts say.

Turkey’s currency, the lira, has plummeted in value on the back of repeated interest rate cuts since September by the central bank despite high inflation. The bank is under the increasing influence of Erdogan, a long-time opponent of high interest rates.

Erdogan has announced a “new” economic plan, targeting growth at any cost through low rates, cheap labour and increased exports.

Elvan was replaced by his deputy, Nureddin Nebati, who is seen as close to the president’s family and has been strident in his defence of cutting interest rates despite high inflation.

Erdogan has shown no sign of giving ground, declaring in a television interview two days before Elvan’s resignation that there would be “no turning back”.

“Turkey has now abandoned the monetary policy based on high interest rates that caused several developing countries to remain stagnant,” he said.

Experts say he risks runaway inflation that will hit the poorest hardest.