Turkish business chief slams banks after interest rates climb

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 sharply after the central bank more than
doubled it benchmark interest rate in recent months 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 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 say high interest rates
are essential to attract foreign capital to the country and to prevent another
bout of lira selling pressure. But they are concerned that President Recep
Tayyip Erdoğan, who has opposed higher borrowing costs, will pressure the
central bank to lower rates earlier than it plans.
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 since.
The weighted average interest rate on
commercial loans denominated in liras rose to an annual 19.6 percent as of Jan.
1, central bank data shows. That compares with 15.9 percent just prior to
Ağbal's appointment and 12.2 percent at the end of August. Unlike consumer
loans, banks charge variable rates of interest on commercial loans in Turkey.
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.
The lira hit a record low of 8.58 per
dollar on Nov. 6, the day prior to Ağbal's appointment. It has since
strengthened to trade at around 7.4 against the U.S. currency.