Turkey unveils $6bn investment package in run up to election

The Turkish government will invest some $6 billion in social reform and debt restructuring packages in the run up to the June elections, Prime Minister Binali Yildirim announced yesterday, according to Hurriyet Daily News.

Yildirim said the measures would restructure tax and take steps towards registering the nearly 13 million unlicensed properties in Turkey. Despite the high cost of the package Yildirim said that the implementation of a “structure registration document” would offset the cost, projected to earn the government some $11 billion.

The prime minister also declared that the government would give 1,000 liras ($244) to pensioners before the two main annual Muslim holidays each year and nearly doubled the monthly additional pensioners’ allowance to 500 lira ($122).

The package is the second major investment plan the government has announced in recent weeks, having unveiled details of a $34 billion scheme aimed at creating jobs in the private sector and reducing the country’s rising deficit last month.

The initial stage of the plan will be implemented despite Turkey’s snap presidential elections only six weeks away; the ruling Justice and Development Party (AKP) has often rolled out incentives ahead of elections in its 16-year rule.

READ: Turkey’s Erdogan starts campaigning for snap June elections

The announcement also comes amid the International Monetary Fund (IMF) praising Turkey’s financial reforms, but pointing to the possibility of the economy overheating.

According to official data, Turkey’s economy grew 7.4 per cent last year, following 3.2 per cent growth in 2016, outpacing China and India.

“Turkey’s growth performance last year was very impressive. It was the fastest growing economy among G20 countries. Not only did real GDP growth reach almost 7.5 per cent last year, the economy created one million jobs, which is truly impressive,” IMF Mission Chief to Turkey Donal McGettigan told the Anadolu Agency.

However, McGettigan echoed previous warnings that such rapid growth came at a cost, with high inflation and a widening current account deficit pointing to the economy overheating. The country’s inflation rate currently stands at 10.23 per cent, double the central bank’s target of five per cent.

The Turkish lira has also been consistently falling to record lows against the US dollar, euro and British pound. The lira is the fourth-worst performer so far this year among more than 20 emerging market currencies.

Last week, in an attempt to contain inflation, the central bank raised one of its main rates, the late-liquidity lending rate, from 12.75 per cent to 13.50 per cent, in line with the IMF’s advice.

However, the government has been reluctant to take on board suggestions from the global institution; senior presidential advisor Cemil Ertem previously called the requests “failed economic theories” and concluded “we are going to do the exact opposite.”

READ: Turkey to get worst EU scorecard so far, officials say