Turkish President Recep Tayyip Erdogan is preparing to announce what could be his costliest pre-election giveaway yet with a plan to offer debt relief to millions of people.
(Bloomberg) —
Turkish President Recep Tayyip Erdogan is preparing to announce what could be his costliest pre-election giveaway yet with a plan to offer debt relief to millions of people.
Under the proposal, outlined Friday by the ruling AK Party, the government would erase interest payments accumulated by consumers up to the last day of 2022. It could also allow for an extensive restructuring of debts ranging from student loans and administrative fines to water bills.
Further details will likely be announced by Erdogan “in a few days,” Bulent Turan, deputy whip of the AK Party in parliament, told Bloomberg.
Read more: Why Erdogan Reelection in Turkey Isn’t a Sure Bet
With five months left to critical elections, Erdogan wants to keep government largesse flowing to cash-strapped Turks as the country emerges from one of the world’s biggest inflation crises.
Turkey already increased the minimum wage for this year by 55% and promised early retirement to over 2 million employees, a decision expected to cost the government some $13 billion. Pensions and civil servant wages were meanwhile raised by 30% and may see an interim hike in July.
Though Erdogan remains Turkey’s most popular politician, his party has lost support among the poor, who’ve typically been among its most stalwart backers.
Election Splurge
While the handouts are proving expensive, the government has capacity to fund looser fiscal policy after ending 2022 with a far narrower budget deficit than expected. It already provided almost $16 billion of tax relief last year, according to Treasury and Finance Minister Nureddin Nebati.
The initiatives announced in the last few weeks “are costly but recent budget performance leaves room at least for the first year,” Zumrut Imamoglu, BofA Merrill Lynch’s Turkey economist, said in a report this week. “We expect more such packages or policies closer to the elections as needed.”
Turks Scrape By on Credit-Card Debt as Food Inflation Nears 100%
The latest promise of relief for consumers will prove a powerful draw in a country that’s contending with the worst cost-of-living crisis in two decades.
As spiraling prices gutted household budgets, Turks have grown reliant on credit cards — even using them to buy staples to get by — because they offer a much cheaper alternative to taking out consumer loans.
The amount of credit card spending increased by around 144% in the second week of January on an annual basis, official data showed. While the central bank cut its benchmark to 9% last year, the average rate on consumer loans was still nearly 29% as of Jan. 13.
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