Price stability is basic objective for Turkey
ANKARA (Reuters) – Price stability will remain the basic goal of the new Turkish government’s economic policy, newly appointed Economy Minister Mehmet Simsek said yesterday. «Reaching price stability by preserving fiscal discipline will continue to be our basic goal,» Simsek told a news conference as he took over the job, saying stable prices were the most important condition for sustaining high growth. The previous AKP-led government brought inflation down to single digits for the first time in a generation and oversaw growth figures of around 7 percent a year as Turkey recovered from a 2001 financial crisis. That helped it win comfortable reelection on July 22. It also followed a policy of fiscal discipline, although in the runup to the election economists said spending ballooned and the inflation-targeting central bank said it had an eye on government spending. «Supporting the central bank in its fight against inflation, through fiscal policy and structural reforms, will be among our basic priorities,» Simsek said, adding that independent monetary policy would continue to be a basic policy. He added that steps would be taken to strengthen Turkey’s competitiveness internationally and boost productivity. Turkey’s large debt load would be reduced further. «Debt management will be carried out in effective coordination with monetary policy to reduce the debt load further and minimize its sensitivity to risks,» Simsek said. Simsek, a former Merrill Lynch economist, takes over from Ali Babacan, who becomes foreign minister. But Deputy Prime Minister Nazim Ekren has been appointed economic coordinator, a new role overseeeing all economic matters. ‘Ambitious’ tax cuts Separately, the chairman of the country’s semi-official Tax Council said yesterday that the new government’s parallel plans to reform tax law and reduce the unregistered economy will open the way for ambitious tax cuts. «It is one of the important projects of the coming period,» Mustafa Uysal told Reuters in an interview. «Preparations have been done for this. If the action plan on the unregistered economy can be put in place with the income tax reform, it could open the door to much more ambitious income tax cuts,» he added. The government aims to correct injustices in the tax system and help competitiveness. It pledged in its election manifesto to try to fight against a huge unregistered economy, simplify the tax system and reduce tax on employment. Reducing the size of the unregistered economy is necessary as part of Turkey’s bid to join the European Union, while it should also boost tax revenues. Uysal said the Tax Council, a body comprised of government officials and private sector representatives which advises the government on tax policy, would work to finish drafts for income tax and tax system laws in October. The council presents the drafts to the Finance Ministry, which then sends them to parliament via the Prime Ministry, usually with minimal changes.
