Turkey's president announced on Saturday a tax cut on basic food supplies as the country grapples with rampant inflation.
President Recep Tayyip Erdogan said the value-added tax [VAT] will be reduced to 1 percent from 8 percent on food purchases. His decision will come into force on Monday.
Erdogan said that, in addition to the tax cut, the government "expects" food companies to lower their prices by 7 percent. He said that these foods play an important role in inflation.
Official data for January showed inflation rose to 48.69 percent on the year, although independent experts say it is more than 115 percent.
"We will not allow inflation to crush our nation," Erdogan said.
also
Turkey's economic policy fails
Critics, however, say the country is suffering from high inflation because of Erdogan's insistence on lowering interest rates. He believes that inflation is caused by high interest rates, contrary to economic theory.
The central bank, whose independence has been eroded by the government, had cut the key interest rate by 500 basis points since September to 14 percent, but halted rate cuts in January.
Because Turkey relies on imports for its energy needs, as well as raw materials and many food supplies, prices have skyrocketed.
The lira closed this week at 13.49 against the dollar. The record low in December was 18.36.
also
Inflation in Turkey declines for the first time in more than a year
The Minister of Treasury and Finance, Nureddin Nebati, also announced a step to encourage people to bring in the gold they kept "under the pillow". He said 1500 gold depository locations would begin operations on March 1 to integrate the precious metal into the financial system as deposits.
He added that people will be able to withdraw their gold in physical form if they wish.
