Fight to reach price stability will continue, says minister
The fight will continue until the target of establishing permanent price stability is reached, Treasury and Finance Minister Nureddin Nebati has said, adding that the FX-protected deposit scheme (KKM) has helped curb local demand for foreign currencies.
“We are closely following the effects of the measures taken on inflation. Even though inflation inertia and negative expectations [of inflation] limit the impacts of tax reductions on price increases, those measures taken show our determination and still help slow inflation,” Nebati said.
The government has never allowed exorbitant price increases and never will, Nebati said, stressing that steps designed to support and protect people against the high cost of living will continue to be taken.
The minister recalled that the value-added tax was slashed to curb increases in food prices and that financial support is being provided for the natural gas consumed in residences and that those measures mean that 241.3 billion Turkish Liras of tax revenues will not be collected.
Nebati furthered that “Inflation teams” have been in the field to inspect businesses and that they also scrutinize electronic documents, such as invoices, as part of the efforts to fight inflations.
To date, the teams, comprised of tax experts and revenue specialists, conducted inspections at 320,000 businesses, mostly those operating in the food, automotive, beverages, cement, cosmetics and construction sectors, and they will remain in the field to conduct such checks, he said.
“We will continue to take measures with determination in the period ahead to fight inflation.”
According to the latest official data, consumer prices advanced 4.95 percent in June from May. The annual inflation rate, consequently, increased from 73.5 percent to 78.6 percent last month.
‘KKM scheme works’
The KKM volume reached 1 trillion liras as of July 8, and 515 billion liras of this amount came from the foreign exchange deposit accounts, Nebati also said. “This data indicates that the KKM instrument is effective in curbing the demand of locals for foreign currencies.”
The amount of deposits in foreign exchange accounts held with banks declined from $261.6 billion on Dec. 22 last year to $233.4 billion, he detailed.
“The KKM scheme supports the liraization and limits pressures stemming from exchange rates, and it prevented a possible higher cost-push inflation. The exchange rates have also stabilized, and the volatility in exchange rates have eased after the introduction of the scheme,” Nebati said.
If the KKM scheme had not been introduced, the cost across the economy could have been much higher due to the exchange rate-related effects, Nebati added.