By Nevzat Devranoglu and Zeynep Berkem
ANKARA (Reuters) – Turkey’s latest monetary and fiscal moves are steps in the right direction, though regaining credibility in economic policy remains a challenge, a European Bank for Reconstruction and Development (EBRD) executive said on Friday.
Turkey’s central bank on Thursday hiked its benchmark interest rate by 250 basis points to 17.5% and promised more tightening. The country is beset by high inflation and a weak lira currency. It also introduced tax hikes this month in an effort to keep a growing budget deficit in check.
EBRD vice president for policy and partnerships Mark Bowman said during a visit that the bank had been “impressed by the strength and resilience of private sector companies.”
The policy steps of the last few weeks were “movements in the right direction”, though concerns remained about the macroeconomic backdrop.
“Macroeconomic stability and regaining credibility in macro policy is an ongoing challenge and there is obviously more work that still needs to be to be done,” he told Reuters.
After holding talks with Turkish officials, he said the EBRD had monitored the macroeconomic situation very closely, and all ministers were committed to the policy agendas that the bank discussed with them.
The EBRD is the leading institutional investor in Turkey, having invested more than 18 billion euros in the country since 2009, mostly in the private sector.
Bowman said the bank would support Turkey’s green transition and had provided 400 million euros ($445 million) in recovery funds for the region hit by devastating earthquakes in February, a sum it aimed to increase as quickly as possible.
Damage caused by the earthquakes, which killed more than 50,000 people, is estimated at more than $100 billion.
($1 = 0.8989 euros)
(Reporting by Nevzat Devranoglu and Zeynep Berkem; Editing by Daren Butler)
