Istanbul -

The Turkish government recently announced a series of measures to support the lira and the standard of living of citizens and reduce inflation rates, which reached the highest level in 24 years last May, reaching 73.5% on an annual basis, according to data from the Turkish Statistics Authority.

During the past days, official statements appeared from the Turkish government and officials from the ruling Justice and Development Party, regarding a government decision to raise wages and salaries for workers in the public and private sectors.

A trend to increase wages in Turkey

Recently, Turkish Treasury and Finance Minister Nureddin Nebti announced the government's intention to announce an increase in the salaries of government employees and retirees by 40% as of next July.

This was preceded by a statement by Numan Kurtulmus, deputy head of the ruling Justice and Development Party, in which he spoke of an expected 40% increase in the salaries of public sector workers and retirees, in addition to raising the minimum wage by the same percentage.

And on Monday, President Recep Tayyip Erdogan confirmed that he would announce wage and salary hikes upon his return from the Spanish capital Madrid, which he is visiting in order to participate in the NATO Leaders Summit.

As for the Turkish Central Bank, which is charged with achieving price stability, it has repeatedly stressed - through official data - that the main cause of inflation in the country is the high foreign exchange rate against the Turkish lira.

Treasury and Finance Minister Noureddine Nebti announced an intention to increase the salaries of government employees and retirees by 40% (Anadolu Agency)

Measures to limit the decline of the Turkish lira

With the aim of limiting the depreciation of the Turkish lira against major foreign currencies, especially the dollar and the euro, the authorities announced a set of decisions, namely:

  • The Turkish Ministry of Treasury and Finance recently revealed the “Turkish Lira Deposit Protected from Exchange Rates” system, a financial mechanism that ensures that the lira depositor does not fall victim to exchange rate fluctuations, and obtain the declared interest, in addition to the difference in the dollar price between the time of deposit and withdrawal.

  • The Turkish Ministry followed this up with a new measure related to the issuance of government bonds to support the savings of the lira, reduce inflation and enhance the value of the local currency.

  • As for the third step taken by the Turkish government during the last 3 months, it was represented in the decision of the Banking Supervision and Regulatory Authority (BDDK) to limit the process of granting loans to companies with assets in Turkish lira exceeding 15 million Turkish liras (about 900 thousand dollars). , with the aim of pushing it to sell the foreign exchange it owns, and limiting giving loans to companies with assets worth less than 15 million Turkish liras.

Positive results

The measures taken by Turkey during the past few months have yielded positive results, according to the data of the Ministry of Treasury and Finance, as Minister Noureddin Nebti announced on June 15 that the general budget achieved last May a surplus of 143.9 billion liras (about 8.41 billion dollars). ).

He explained that the general budget surplus from January to last May - excluding interest payments - amounted to 246.5 billion pounds (about 14.5 billion dollars), and that budget expenditures between January and last May amounted to 959.8 billion pounds (about 56.4 billion pounds). billion dollars), while revenues amounted to one trillion and 84.4 billion pounds (about 62.8 billion dollars).

The Turkish minister indicated that the general budget revenues last May rose 203.9%, achieving 317 billion and 753 million liras (about 18.64 billion dollars) compared to the same period in 2021.


 What about the effects of raising wages and salaries?

Turkish economic expert Yilmaz Ozturk told Al Jazeera Net, "There are steps that are being taken to reduce inflation in the medium term, and the priority at the moment is to support purchasing power and not to crush citizens under inflation."

He added, "But from an economic point of view, raising salaries and wages has positive and negative results. The increase is positively reflected on consumer spending (improving income and increasing welfare), and thus this increase is reflected in economic growth rates."

Ozturk continues, "Since most of the groups benefiting from the salary increase are for low- and middle-income people, this will lead to increased consumption and economic growth, and therefore the increase in salaries will be reflected in an increase in the commercial, industrial and service movement in the country."

As for the negative side of this step, according to Öztürk, it lies in the fact that an increase in salaries means an increase in liquidity in the markets, an increase in the money supply, and thus higher inflation rates as a result of the cash abundance in exchange for a decline or limited production in light of the high cost of imports of energy and raw materials due to the depreciation of the lira Turkey and the global supply chain crisis.

According to Ozturk, the rise in global energy prices as a result of the Russian war on Ukraine, in addition to Russia's ban on oil, gas, fertilizer, wheat and grain exports from the Black Sea region in response to Western sanctions, will reduce supply in exchange for increased demand for products, which will lead to a higher cost of production inputs to be reflected on the consumer in the end.

He concluded his statement by saying, "We also do not forget that the increase in salaries and wages negatively affects the state's finances by increasing its obligations and forcing it to raise the budget, borrowing or withdrawing from reserves."

The need to adjust prices in the market

The writer and economic analyst Sharaf Oguz says that raising the wages of workers and employees will not contribute to reducing inflation, indicating that Turkey is committed to the rules of the free market, which allows large traders to manipulate prices and achieve the largest possible profit.

Oguz added in an interview with the Turkish "Bloomberg" channel, that the government should make more efforts to control the prices of goods in the markets and impose severe penalties on supermarket chains that raise the prices of goods, especially food ones, in a way that is not commensurate with the high energy prices in the country.

He also pointed out that one of the most important reasons that led to the high rates of inflation in the country is the monopoly of some large traders on goods in their stores and not putting them on the market, which leads to an increase in demand and consequently an increase in prices.

Oguz expected that the high inflation in the country will continue until the beginning of next year, pointing out in this context that there are no data indicating the possibility of a decline in energy prices in the world.

It is noteworthy that the Turkish economy achieved during the first quarter of this year 2022 a growth of 7.3%, according to data published by the Turkish Statistics Authority.

And the international credit rating agency, Fitch, raised its forecast for the growth of the Turkish economy during 2022 from 2.4% to 4.5%.