Iyi Party Chief Economic Policy Advisor Prof. Dr. Bilge Yılmaz said, “It is not necessary at this stage to raise interest above inflation” in an interview to Turkish news and commentary outlet Oxygen.
Yılmaz gave an interview to Güzem Yılmaz Ertem and Hakan Bürümcekçi from Newspaper Oxygen. Yılmaz said, “Now, if we take over the task of governing the nation, our target is to reduce monthly inflation to 1.5 percent in June 2024, and to reduce it to 20 percent annually going forward.” Yılmaz added that the next Central Bank management will return to inflation targeting with “first class” people at the helm and quarterly projections of inflation as forward guidance.
“There is no budgetary discipline”
Yılmaz asserted that there is no budgetary discipline left in Turkey; and widening budget deficits will return as very high inflation in a few months after the elections. The question “How will you fulfill the election promises of Kemal Kılıçdaroğlu, the presidential candidate of the Nation Alliance?” Yılmaz answered as follows:
“A serious wealth and income distribution distortion has been created in Turkey, especially because of inflation. It was there before inflation, but with rampant inflation taking hold recently; a certain segment of people got rich. We will have to increase expenditures to protect the low-income citizens. The economy team, than, will sit down and decide which line items ought to be cut. In agriculture, cash subsidies are less than they should be, but the industrial policy is in shambles. Public money is wasted in a very wrong way on frivolous capex projects. Exiting KKM, the FX-protected deposit scheme, will also have a cost.”
Exit from KKM
Reiterating that the currency-protected deposits (KKM) whose size exceeds 100 billion dollars will be terminated, Yılmaz said, “The promises made here to depositors will be kept, but we will end the scheme. Of course, this will have a cost to the Treasury. It will increase Turkey’s debts by maybe 3-4 points. In other words, what would we do for this country with 3-4 percent of our gross national product? In agriculture, in education for our children, in food… But the state squandered that money. We will add final KKM payments to our debt, but Turkey’s domestic debt is not at a level that cannot be sustained,” he said.
Touching on the exchange rate policy, Yılmaz said that they are working on different scenarios; adding, “The policies we will employ according to the level of the exchange rate (when the new administration takes over) are different. Of course, we have an optimal path in mind, we will go in that direction. We want the exchange rate not to be pegged, overvalued, overvalued. Our goal is to make the exchange rate a boring subject in Turkey,” he said.
Interest rate policy
Stating that it is not necessary for Turkey to pay interest above inflation at the moment, Yılmaz said, “This is not just a matter of real interest rates. It is necessary to guide expectations so that the perceived rates are positive in real terms. It is not necessary at this stage for Turkey to pay a huge spread on inflation. I think it will do a lot of damage to the country,” he said.
“There is no need for the IMF, we will manage with portfolio investments”
Defending the view that Turkey does not need the IMF, Yılmaz said:
“I have declared before that we do not need the IMF in particular and that we will set the economy on the right path without the IMF. I haven’t changed my mind. There are other institutions that can lend to Turkey and provide bridge finances. If necessary, I know that we can easily financer Turkey’s needs by using our international relations. But it probably won’t be needed. We will create an environment where we can get through the crunch with portfolio investments.”
Source: Prof. Dr. Bilge Yılmaz: Enflasyonun üzerinde faiz vermemiz gerekli değil