Turkey Hikes Electricity Prices as it Scrambles to Tackle Economic Crisis

Turkey Hikes Electricity Prices as it Scrambles to Tackle Economic Crisis

Saturday, 1 September, 2018 - 09:30
Turkey increases electricity prices as it seeks to tackle its economic crisis. (Reuters)
Asharq Al-Awsat
Turkey increased on Saturday electricity prices in the country as it tries to tackle an economic crisis that has seen the lira lose 42 percent of its value this year and driven up the cost of natural gas imports.

Electricity prices were raised by 14 percent for industrial use and 9 percent for residential use for the second straight month, according to official figures, a move likely to further feed double-digit inflation.

The increases, published in the government’s Official Gazette overnight, went to into effect from Saturday.

Saturday’s move will likely further feed double-digit inflation. Inflation touched nearly 16 percent in July, its highest in 14 years.

Almost a third of Turkey’s total 293 billion megawatt power production came from natural gas power plants in 2017.

Earlier, Turkey raised a tax on foreign currency deposit accounts and scrapped another on lira savings.

According to a decision published in the Official Gazette on Friday, the withholding tax on foreign currency savings of up to six months was raised from 18 percent to 20 percent.

Withholding tax on lira deposits of more than one year was, however, lowered from 10 percent to zero.

The lira strengthened by some 2.1 percent following the move, trading at 6.51 against the dollar.

Initially sparked by worries about President Recep Tayyip Erdogan’s influence on the central bank, the lira sell-off has worsened over a rift with Washington over an American pastor detained in Turkey on terrorism charges.

Erdogan, a self-described “enemy of interest rates”, wants to see lower borrowing costs to keep credit flowing, particularly to the construction sector.

Investors, who see the economy heading for a hard landing, want to see decisive interest rate hikes to rein in inflation.

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