Erdoğan says former ally Babacan was ‘lover of interest rates,’ took orders from IMF

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Turkish President Recep Tayyip Erdoğan has described former Deputy Prime Minister Ali Babacan as a “lover of interest rates” and claimed he took orders from the International Monetary Fund (IMF) during the global financial crisis of 2008, according to Turkish media reports.

Babacan has frequently been targeted by Erdoğan over the past weeks since he parted ways with Erdoğan’s ruling Justice and Development Party (AKP) and is preparing to establish a rival party.

“I made a call at the time of the 2008 economic crisis and said the crisis would affect Turkey only slightly. There are some people who are preparing to establish a new party now. They were with me at the time and objected to what I said. Why? Because they were taking orders from the IMF,” Erdoğan said during a television interview over the weekend.

Babacan was at the helm of the Turkish economy at the time of the global financial crisis.

“They had that kind of attitude. They were actually interest rate lovers. I was always asking for the reduction of interest rates. … My belief is that there is a cause and effect relationship. Interest rates are a cause while inflation is an effect, there is a correlation between them. The more the interest rates fall, the more the inflation drops,” added Erdoğan.

Turkey’s central bank has slashed interest rates in half to 12 percent since July 2019, when Erdoğan sacked and replaced its governor for failing to support the government’s pro-growth economic policies. Economists partly attribute a currency crisis that erupted in August 2018 to an overheating economy and Erdoğan’s stance on interest rates, which has fuelled investor unease.

Inflation in Turkey rose to 11.8 percent in December from 10.6 percent the previous month and 8.6 percent in October, the lowest level in about three years.

Turkish Minute

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