Turkey pledges to enhance financial institutions, democracy

Turkey's new treasury and finance minister has pledged to increase the “operational competencies” of all financial and relevant institutions.

Following a decision by the country's Central Bank to hike interest rates on Thursday, Lutfi Elvan said the healthy functioning of the bank’s monetary transmission mechanism would be critical for price stability.

“The bank is responsible for determining and implementing policies and tools that will ensure price stability,” he said on Friday, adding that it would adopt a simple monetary policy framework in the coming period.

It is important that both credit and deposit markets operate in a competitive structure, the minister said.

“In this context, reducing intermediation costs and establishing pricing in credit and deposit markets within the free market mechanism is vital,” he said.

Achieving macroeconomic stability, including price stability, will be an important requirement for sustainable growth and increasing social welfare, he underlined.

“In this context, we’ll formulate our fiscal policies, financial sector policies, and public finance policies in a way that will continuously support macroeconomic stability, complementing the monetary policy steps that are being taken.”

‘Price stability to spur sustainable growth’

Supporting a monetary policy focused on price stability with public fiscal discipline, and determining public wages and pricing in line with inflation targets, will be critical for the rapid convergence of inflation expectations and targets, Elvan stressed.

“The main purpose of economic policies is to increase social welfare, which includes employment growth, fair income distribution, and sustainable growth,” the minister said.

“The precondition for these is macroeconomic stability.”

Undoubtedly, he added, price stability contributes to sustainable growth and social welfare by increasing predictability in the economy.

“This is a generally accepted situation, as demonstrated by the experiences of Turkey and other countries,” he said.

The Turkish Central Bank increased its one-week repo rate – also known as the bank’s policy rate – from 10.25 percent to 15 percent on Thursday, tightening its monetary policy to ensure price stability.

A new era for economy, democracy

President Recep Tayyip Erdogan said on Friday the Turkish government is also determined to bring a new boom era for democracy.

"We are working on both strengthening our economic policies and raising the bar of democracy and freedoms while easing daily life for our citizens," Erdogan said in his speech at a trade fair in Istanbul.

Noting that the support of the business circle and citizens is crucial to achieve the economic goals, Erdogan said, "First of all, we must bring overseas savings to our country."

He urged the business circle to put money in investment, employment, production and exports.

Investments that spur production and employment will be accelerated by mobilising domestic and international entrepreneurs, Erdogan added.

"We should enhance the trust of our nation and investors in our national currency, Turkish liras,  and thus reduce the weight of foreign exchange currency in deposits," he noted.