The government, which entered the election marathon, is preparing to distribute low-interest hot money

As Turkey enters the election period, the economy administration is giving the message that it will accelerate the flow of hot money in order to activate the market, both with the Medium Term Plan targets it has announced and its rhetoric. While low-interest housing and vehicle loans and SCT reductions are expected for households in the market, low-interest Credit Guarantee Fund (KGF)-supported loans are next for the business world.

Treasury and Finance Minister Nureddin Nebati recently announced that a new support package has been prepared to fill the collateral deficiencies of Small and Medium-Sized Enterprises (SMEs). While technical studies on the new Treasury Backed Bail Package work continue, a comprehensive loan package supported by KGF is expected in the markets.

KGF, which was established to provide access to credit for SMEs with insufficient collateral, gave a guarantee of 234.1 billion TL for 483 thousand companies as of June 22. However, the criticism that these loans are used outside of investment has been on the agenda for a long time. Nureddin Nebati, the Minister of Treasury and Finance, made the harshest criticism on this subject, saying, “Credit Guarantee Fund’s loans did not go to investment, but to yachts, flats and foreign currency. Now it will be controlled,” he said.

Will the KGF loans that Nabati, who supports this view, claim to give in a controlled manner in the coming days, go to investment?

Economists have a common view: The cheap money distributed in the pre-election environment will go to yachts, flats, foreign currency or goods instead of investing in a period of lack of confidence.


Saying that the expectation that the government will distribute money to the market before the election has increased in recent months, Ziraat Bank former Deputy General Manager Prof. Dr. Şenol Babuşçu said that it is impossible for low-interest loans to be converted into investments. “They will definitely take measures so that the bed does not go to the floor, but as soon as it will be functional,” Babusçu said:

“The only thing that is clear is that he is not going to invest. There will also be low-interest housing loans. However, in a country with such high inflation, distributing such hot money to the market will inevitably trigger inflation and make it difficult for low-income wage earners.”


prof. Dr. Bilsay Kuruç also argued that cheap loans to be distributed in an inflationary environment will go to foreign currency rather than supporting the market. Kuruc said:

“Is it possible to invest when there is such high inflation and pre-election uncertainty? The government says to those who can officially take the loan, ‘Go get foreign currency’. No investment is made when the loss of confidence is at such a low level.”


prof. Dr. Aziz Konukman emphasized that such steps will be useless before inflation is resolved and an environment of trust is established. Konukman said, “These loans, of course, go to the floor. They will tie the cheap money bought at this inflation rate to the goods. There is an election, there is a possibility that the government will change, why should anyone invest with these costs? said.


Konukman also made a new call to TURKSTAT regarding the calculation of inflation. Stating that TUIK should announce different inflation rates for different segments of the society, not the average, Konukman said:

“There is the ‘Law of Obstacles’ in economics. As income increases, the proportion of money spent on food decreases. In other words, the inflation of the richest 20 percent of the society and the poorest 20 percent will not be the same. Separate inflation rates should be announced for these two segments.”

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