By Bahattin Gonultas
President Recep Tayyip Erdogan said Wednesday people in Turkey paid some of the world's highest interest rates, something which had to change in order to achieve high growth.
"Turkey's real interest rate is among the highest in the world. That makes me very uncomfortable... We need to change that," he told the signing ceremony of a strategic cooperation agreement between Turkey's Borsa Istanbul and the Islamic Development Bank Group (IDB).
He said the overnight interest rate reached 7,500 percent after Turkey’s economic crisis of 2001.
"Some years tax revenues could not cover the interest payment," he added.
Erdogan recalled how Turkish lenders reduced interest rates in order to boost growth as the country needed to grow above five percent in order to provide employment to working-age citizens.
The Turkish Central Bank's board will meet Thursday to make a decision whether to change interest rates.
"I am calling on lenders: please reduce interest rates to reasonable levels. Look at unemployment in the country. If we want growth, we need employment, investment and competition. Unemployment is above 11 percent; is this what this country deserves?" he said.
The Turkish leader suggested adopting the gold standard to combat international pressures.
Erdogan also said he had no words on the central bank's independence but said that “as a politician” he had a responsibility to the public who were being hurt by high rates.
On Oct. 20, the country's central bank held key interest rates at their current levels after reducing its main interest rate over the last seven months.
The one-week repo rate would be kept at 7.50 percent while the borrowing rate would remain at 7.25 percent, in line with expectations, the body said. The overnight lending rate would stay at 8.25 percent.
- Borsa Istanbul inks Islamic finance deal with IDB
Turkey's Borsa Istanbul and the IDB on Wednesday signed a strategic cooperation agreement which aims to expand Islamic finance in Turkey and other IDB member countries.
Bandar Hajjar, president of the Islamic Development Bank Group, told the signing ceremony: "It is indeed a proud moment for IDB to be involved with Borsa Istanbul in providing assistance for developing Islamic finance initiatives, products, investment options and, above all, a platform for investors to invest with Borsa Istanbul in a Sharia-compliant manner."
Hajjar said the strategic objectives of Borsa Istanbul are "unique", and once implemented, would place Borsa Istanbul as an investment hub of choice for discerning Islamic finance investors.
According to the agreement, the IDB will explore opportunities for its strategic stake acquisition from the country's exchange operator, Borsa Istanbul.
The agreement also covers cooperation in terms of an integrated gold trading platform to be established within the umbrella of Organization for Islamic Cooperation Member States’ Stock Exchanges Forum and to work on establishing an international Islamic Finance Board in Turkey.
They will also seek to develop opportunities to exchange information, expertise and technical know-how, as well as together provide consultancy to third parties pertaining to Islamic finance in order to contribute to the improvement of non-interest finance in Turkey and the broader region.
The bank has contributed to the establishment of Albaraka and KuveytTurk participation banks through equity investments. The IDB’s six sukuk, which is a financial certificate -- like a bond which complies with Islamic religious law by avoiding interest payments -- worth over $6.5 billion, began trading at the exchange.