Turkey increased natural gas wholesale prices by 50 percent for industrial facilities and by 35 percent for households in a latest blow to consumers and businesses suffering from sky-rocketing inflation.
Natural gas costs for electricity production also rose by 44.3 percent, state-run pipeline company BOTAŞ said late on Thursday.
Consumer price inflation in Turkey surged to 54.4 percent in February, the highest level in two decades, and is expected to accelerate further in March, when the war in Ukraine caused a surge in the cost of oil and natural gas. Turkey imports nearly all the oil and gas it consumes, leaving its economy vulnerable to price swings.
At the start of January, BOTAŞ announced an increase of between 15 percent and 50 percent in natural gas prices. The Energy Market Regulatory Authority (EPDK) introduced price hikes of between 52 percent and 130 percent for electricity the same month, prompting protests by businessmen and Turkey’s main opposition party leader to say that he was refusing to pay his bill.
Turkish President Recep Tayyip Erdoğan approved a 50 percent increase in the minimum wage in December to help cushion the impact of accelerating price increases on the poorest segments of Turkish society. He faces elections by June 2023. Erdoğan’s unconventional economic policies, which have included ordering the central bank to cut interest rates, have exacerbated Turkey’s economic woes and pushed up inflation.
Erdoğan sought to dampen speculation in the media of a further increase in the minimum wage in a statement on Thursday.
Turkey’s central bank has been forced to fund BOTAŞ with foreign currency to purchase natural gas, negatively impacting the bank’s already depleted reserves, which it has spent to defend the fragile lira. It sold $4.1 billion to BOTAŞ in January and $6.1 billion in 2021, according to local press reports.
The financial impact on the economy of soaring energy prices has been exacerbated by losses for the lira. The currency slumped by 44 percent against the dollar last year and has dropped by a further 10 percent in 2022.
Consumer price inflation in Turkey is expected to accelerate to more than 60 percent in March, according to a Reuters poll published on Monday. The Turkish Statistical Institute will publish the figures on Monday. Producer price inflation in the country hit 105 percent in February.
The Turkish lira was trading little changed at 14.68 per dollar on Friday. It was valued at 8.25 against the U.S. currency at the start of April last year.