Turkey’s biggest business group censured the country’s banks for charging excessively high interest rates on loans.
Banks in Turkey are increasing borrowing costs for businesses and consumers after the central bank hiked rates sharply to shore up the value of the lira and to rein in inflation.
Loan costs are now excessive and unwarranted from a business point of view, Rifat Hisarcıklıoğlu, the head of the Union of Chambers and Commodity Exchanges of Turkey (TOBB), said in a written statement on Thursday.
“The high interest rates banks have started charging amount to one of the greatest obstacles to production and investment,” Hisarcıklıoğlu said, pointing to the low cost of borrowing across the world, which now puts Turkish firms at a competitive disadvantage.
“The financing burden on industry must be reduced,” Hisarcıklıoğlu said. “There is a need to pay attention to macroeconomic balances in order to reduce inflation and interest rates to reasonable levels.”
Turkey’s central bank has more than doubled its benchmark interest rate to 17 percent from 8.25 percent four months ago after the lira slid to successive record lows against the dollar. The bank has vowed to keep borrowing costs high this year to slow annual inflation from 14.6 percent towards its medium-term goal of 5 percent.
Investors in Turkey are concerned that President Recep Tayyip Erdoğan, who has opposed higher borrowing costs, will pressure the central bank to lower rates earlier than it planned.
Public support for Erdoğan and his governing Justice and Development Party (AKP) has waned after the lira slumped and inflation accelerated during the pandemic, opinion polls show. His government must call presidential and parliamentary elections by 2023.
Under government pressure, the central bank held interest rates at below inflation during much of last year to help engineer a borrowing boom. Erdoğan sacked and replaced the bank’s governor in early November after the lira hit a fresh record low. New governor Naci Ağbal has hiked rates twice.