Turkish central bank raises interest rates to record-high 30%

Turkish central bank raises interest rates to record-high 30%
The bank reiterated it is ready to raise rates further as needed to rein in inflation that leaped to nearly 59 in August and is expected to rise into next year. Photo/Shutterstock
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Updated 21 September 2023

Turkish central bank raises interest rates to record-high 30%

Turkish central bank raises interest rates to record-high 30%

ANKARA: In its continuing efforts to combat soaring inflation, Turkiye’s central bank sent a resounding message on Thursday when it increased its key interest rate by an astonishing 500 basis points, from 25 percent to an unprecedented 30 percent.

The move signaled the continuation of a significant departure in recent months from the country’s previous unorthodox economic approach, marking a shift toward a more rigorous monetary policy designed to stabilize soaring prices.

“Attaining price stability is our top priority,” Mehmet Simsek, the minister of finance, wrote in a message posted on social media site X.

The substantial rate hike was largely in line with market expectations, underscoring the steadfast focus by Turkish officials on addressing the inflation crisis and regaining the confidence of foreign investors.

The 5 percent increase of the benchmark rate by the central bank’s Monetary Policy Committee came under the leadership of the bank’s newly appointed governor, Hafize Gaye Erkan, who previously was a finance executive in the US. She was appointed in early June, since when there has been a remarkable rise in policy rates totaling an impressive 2150 basis points.

While economists generally welcomed the latest increase, they said that more measures might be required.

“While the (central bank) remains resolute in its return to orthodox monetary policymaking, the simplification process remains gradual, with real rates still deeply negative,” Ehsan Khoman, head of Emerging Markets, Environmental, Social and Governance, and Commodities Research at MUFG Bank in Dubai, told Arab News.

“If there is no return of the one-week repo to levels consistent with price stability, the floodgates of capital inflows will remain on the sidelines,” he added. A repo, or repurchase agreement, is a short-term agreement to sell securities, in order to buy them back at a slightly higher price.

Khoman described Turkiye’s inflation challenge as being secular, characterized by prolonged periods of mild price increases rather than cyclical fluctuations.

“Our view is that it will be challenging to assume an authentic disinflation trajectory that would offer investors comfort to deploy significant capital in the presence of deeply negative rates,” he said.

After Thursday’s decision was announced, the central bank hinted at the possibility of further interest rate adjustments and emphasized its commitment to an ongoing tightening of monetary policy until inflation is under control.

“Monetary tightening will be further strengthened as much as needed, in a timely and gradual manner, until a significant improvement in the inflation outlook is achieved,” the bank said.

“Inflation readings were above expectations in July and August. As the strong course of domestic demand and the stickiness of services inflation persist, the increase in oil prices and the ongoing deterioration in inflation expectations pose additional upside risks to inflation.”

Wolfango Piccoli, co-president of Teneo Intelligence, a consulting and advisory company in London, described the latest interest rate hike as a solid and anticipated move by the central bank.

“The hope is that inflation will not increase further, thanks to the higher policy rate and the ongoing fiscal and credit tightening,” he told Arab News.

“It helps to keep investors’ optimism about the commitment of the new economic team to tackling the inflation challenge but the real test is only starting now, as the policy rate has just reached the ceiling that (President Recep Tayyip) Erdogan has allegedly indicated.”

However, given the lack of tangible political pressure on Erdogan, and the fact that the Turkish opposition remains moribund, the ceiling could be revised upward, Piccoli added.

“Ahead of the approaching local elections in March 2024, economic growth may slow done but there are no alternatives,” he said.

Turkiye unveiled its medium-term economic plan this month, projecting an inflation rate of 65 percent by year-end.

Simsek, the finance minister, had a series of meetings with investors in New York this week in an attempt to attract direct investment and capital inflow. About 120 American investors attended the Turkiye Investment Conference in the city on Tuesday, during which Simsek and Trade Minister Omer Polat delivered presentations.

Still, skepticism persists among some economists about the commitment of the Turkish government and central bank to their economic targets.

For example, Erinc Yeldan, a professor of economics at Istanbul Kadir Has University, highlighted inconsistencies between public statements from the newly appointed economic team, including Simsek and Erkan, and the economic realities.

“There is a problem of inconsistency,” he said. “As elections are looming, there are still concerns on the investors’ side about whether this course will change before all these policies are fully implemented.”

In the current volatile environment, Yeldan believes that Turkiye will only be able to attract foreign investors through one-on-one meetings and financial instruments such as swap operations, which have played a crucial role in channeling foreign capital into the country over the past three years.

Thursday’s interest rate hike is the fourth since Erdogan began to shift away from his previous unorthodox monetary policy of maintaining low rates regardless of high inflation, seemingly signifying a substantial transformation in Turkiye’s economic approach.

Saudi Arabia’s tourist expenditure hits $40bn with 10% growth, says minister

Saudi Arabia’s tourist expenditure hits $40bn with 10% growth, says minister
Updated 1 min 18 sec ago

Saudi Arabia’s tourist expenditure hits $40bn with 10% growth, says minister

Saudi Arabia’s tourist expenditure hits $40bn with 10% growth, says minister

RIYADH: Tourist spending in Saudi Arabia reached approximately SR150 billion ($40 billion), reflecting a 10 percent increase in both traveler numbers and expenditure compared to last year, as revealed by a top minister. 

At a conference convened to review the 2024 summer tourism program, the Kingdom’s Minister of Tourism Ahmed Al-Khateeb also said that Saudi Arabia will launch a tourist visa next month, aimed at attracting more international visitors and bolstering the sector’s growth. 

This comes as Saudi Arabia has set an ambitious target to host 150 million tourists annually by 2030, underscoring its commitment to transforming the Kingdom into a premier global tourism destination. 

The country’s passenger air traffic surged by 17 percent in the first half of 2024, reaching 62 million compared to 53 million in the same period last year, according to statistics released by the General Authority of Civil Aviation.  

This growth was supported by a 12 percent increase in flights, with 446,000 recorded compared to 399,000 in the first half of 2023. 

Highlighting the sector’s rapid expansion, Al-Khateeb shared the statistics from the first half of the year. “We achieved 60 million visits and approximately SR150 billion in tourist spending,” he stated, emphasizing a 10 percent rise in both visitor numbers and expenditure compared to the previous year. 

Emphasizing Saudi Arabia’s diverse attractions and substantial economic impact, the minister described the country as a “continent,” highlighting its vast natural beauty and varied landscapes, including mountains, resorts, Red Sea beaches, and vibrant cities.  

This diversity, he noted, positions Saudi Arabia uniquely to offer a wide array of tourism products to global travelers. 

Highlighting the government’s commitment to its citizens, he outlined initiatives aimed at enhancing opportunities and training for Saudis. “We’ve raised salaries and conduct over 100,000 training courses annually,” he emphasized, stressing the ministry’s proactive stance in encouraging private sector investment in Saudi human capital. 

Al-Khateeb also emphasized the crucial role of the private sector in shaping the tourism landscape. “The tourism and travel sector worldwide is primarily managed by the private sector, and we recognize its pivotal role in our sector’s development,” he affirmed. 

Underscoring the government’s support for infrastructure, Al-Khateeb pointed to the substantial impact of the Tourism Development Fund. Launched a year and a half ago, the fund has already financed over 100 projects totaling SR35 billion, encompassing a mix of small to medium-sized ventures and larger-scale initiatives. 

“In Aseer (region) alone, the Tourism Development Fund has allocated SR1 billion to 10 projects, reflecting a significant focus on enhancing hospitality offerings in the region,” Al-Khateeb highlighted, showcasing the Kingdom’s commitment to regional development through strategic investment. 

To enhance transparency and support stakeholders, the minister announced the launch of comprehensive tourism statistics on the ministry’s website. “An annual report will provide valuable insights for the media and investors, detailing every statistic and figure relevant to Saudi Arabia’s tourism sector,” he concluded. 

Egypt achieves record primary surplus of $18.14bn in fiscal year 2023/24

Egypt achieves record primary surplus of $18.14bn in fiscal year 2023/24
Updated 17 July 2024

Egypt achieves record primary surplus of $18.14bn in fiscal year 2023/24

Egypt achieves record primary surplus of $18.14bn in fiscal year 2023/24

RIYADH: Egypt’s budget recorded a preliminary surplus of 875 billion Egyptian pounds ($18.14 billion) for the fiscal year 2023/2024, compared to 164 billion during the previous period, a top official revealed.

During a Cabinet meeting chaired by Egypt’s Prime Minister Mostafa Madbouly, Minister of Finance Ahmed Kouchouk highlighted that this improvement came despite economic activity shocks.

The North African country’s economy has witnessed blows over the last year due to the ongoing crisis in Gaza, which has slowed tourism growth and cut into Suez Canal revenue, two of Egypt’s biggest sources of foreign currency.

To help alleviate the inflationary effects that have been burdening the Egyptian public, the government in April increased the amount of funding required in its 2024/2025 budget by over 2.8 trillion pounds ($59 billion).

Kouchouk stated that revenues represented an annual growth of about 59.3 percent during the fiscal year 2023/2024.

The budget also achieved a total deficit that was about 706 billion pounds lower than what was listed in the revised budget.

Kouchouk noted the reduction in the overall deficit in the general budget during 2023/2024, which amounted to about 505 billion Egyptian pounds, compared to a deficit of about 610 billion pounds in the previous fiscal year – a decrease of 17 percent.

Despite the deficit shrinking, there were sectors that exceeded their allocated budgets. 

Education required around 256 billion pounds in funding, compared to around 230 billion pounds in the original budget.

Health sector needs totaled about 180 billion pounds, against an initial allocation of about 148 billion pounds.

The public treasury paid the Insurance and Pensions Fund’s dues, which amounted to 185 billion pounds, and settled all fees related to food subsidy support, amounting to 133 billion pounds, compared to about 128 billion pounds in the original budget.

He noted that this, alongside increasing wages and salaries of government employees and providing adequate allocations for various support items and social protection programs, contributed to an annual expenditure growth rate of 37.4 percent.

Kouchouk emphasized the continued efforts to improve the expenditure structure, which was generally achieved for all budget chapters, pointing out that the debt service bill remains high, and efforts are underway to reduce it.

The Minister of Finance reviewed the rates and developments regarding allocations for subsidies, grants, and social benefits, especially those related to supporting industrial production, export incentives, as well as social protection programs, and the health and education sectors.

Kouchouk also discussed the future budget estimates for the fiscal year 2024/2025, explaining that the Ministry of Finance aims to reduce the budget’s debt and place it on a downward trajectory.

Despite the difficulties the public treasury faced in the fiscal year 2023/2024 as a result of regional geopolitical unrest, high rates of inflation, and social programs put in place to protect citizens and pensioners, Kouchouk reiterated that the ministry was able to achieve strong financial performance by taking the required steps to mobilize revenues and control public finances.

Closing Bell: Saudi main index closes in green at 12,157

Closing Bell: Saudi main index closes in green at 12,157
Updated 17 July 2024

Closing Bell: Saudi main index closes in green at 12,157

Closing Bell: Saudi main index closes in green at 12,157

RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Wednesday, gaining 77.24 points, or 0.64 percent, to close at 12,157.61. 

The total trading turnover of the benchmark index was SR7.37 billion ($1.96 billion) as 157 of the listed stocks advanced, while 64 retreated.    

The MSCI Tadawul Index increased by 6.82 points, or 0.45 percent, to close at 1,520.39. 

The Kingdom’s parallel market Nomu decreased by 31.22 points, or 0.12 percent, to close at 25,887.91. This comes as 36 of the listed stocks advanced, while as many as 32 retreated. 

The best-performing stock of the day was AYYAN Investment Co., with its share price surging by 9.97 percent to SR19.42. 

Other top performers include the Miahona Co. and Al Sagr Cooperative Insurance Co., whose share prices soared by 9.88 percent and 9.41 percent, to stand at SR42.25 and SR24.88, respectively. 

National Gas and Industrialization Co. and Al-Baha Investment and Development Co. were also amongst the top gainers.  

The worst performer was the Mediterranean and Gulf Insurance and Reinsurance Co. whose share price dropped by 2.46 percent to SR31.70. 

Other underperformers included Baazeem Trading Co. and Arabian Pipes Co., with their share prices declining by 1.53 percent to SR64.30 and 1.20 percent to SR131.40, respectively.

Saudi Public Transport Co. and Red Sea International Co. also experienced declines in their stock prices.

Value Capital Co., serving as the financial advisor and lead manager, announced that Tharwah Co. intends to offer 705,735 ordinary shares, representing 15 percent of its total shares post-offering. The company’s shares will be listed on Nomu. 

Tharwah Co.’s application for listing on the parallel market. was approved by the Saudi Exchange on May 19, and the Capital Market Authority approved the offering on June 3. The price per share for subscribers will be determined after the book-building period. The one-week offering period is scheduled to commence on Aug. 4. 

Alkhabeer Capital, a Shariah-compliant investment and financial services firm, has announced the listing and commencement of trading for the Alkhabeer Diversified Income Fund 2030 on the Saudi Exchange. 

In an official statement, the fund reported successful participation from a diverse group of investors, including individuals and institutions, during its initial public offering.  

The IPO concluded on June 13, attracting 144,132 subscribers and raising a total of SR305.4 million. 

Saudi Cabinet approves establishment of national minerals program

Saudi Cabinet approves establishment of national minerals program
Updated 17 July 2024

Saudi Cabinet approves establishment of national minerals program

Saudi Cabinet approves establishment of national minerals program
  • Program aims to develop Kingdom’s infrastructure and support local supply chains
  • Saudi Arabia’s mineral wealth is valued at an estimated $2.5 trillion

RIYADH: Saudi Arabia is set to launch a new national minerals program, further strengthening its position as a regional and global center for the mining and metals sector. 
The Saudi Cabinet has approved the establishment of the initiative, which is set to be linked to the Kingdom’s Ministry of Industry and Mineral Resources, according to a statement. 
The newly announced program is expected to meet the growing local, regional, and global needs for minerals, build local capabilities, and contribute to exploration operations. 
This is in line with Saudi Arabia’s ambition to transform mining into a foundational industrial pillar of the country’s economy. It also aligns with the ministry’s goal to further bolster the sector and contribute to ongoing developments under Saudi Vision 2030. 
According to a ministry statement released earlier this year, the Kingdom’s mineral wealth is valued at an estimated SR9.4 trillion ($2.5 trillion). 
The Minister of Industry and Mineral Resources Bandar Alkhorayef thanked King Salman and Crown Prince Mohammed bin Salman for the cabinet’s approval and said the program will effectively drive growth in the minerals sector and exploit the country’s mineral wealth. 
“The Council of Ministers’ decision to establish the National Minerals Program will constitute a qualitative shift in supporting supply chains in the industrial and mining sectors and strengthen the Kingdom’s position as a regional and global center for the mining and minerals sector,” Alkhorayef said in a statement. 
“The Kingdom’s directions aim to develop mineral value chains so that the mining sector becomes the third pillar of the national industry and to benefit from the Kingdom’s geographical location, which represents one of the most important major trade intersections,” he added.
The statement further revealed that the initiative will entail important functions, including ensuring the quality and adequacy of supply chains for current and future minerals and developing and managing their strategic storage.
It will also work on quantifying and following up on securing Saudi Arabia’s mineral needs, developing plans and strategies, and providing industrial supplies of mining raw materials.
The nation’s mining sector has been expanding locally and internationally, with significant strides being made.
In March, the Kingdom’s mining sector recorded a 138 percent increase in the issuance of exploitation licenses since the new Mining Investment Law was implemented in 2021. 
The number of permits recorded rose from eight in 2021 to 19 last year as the Ministry of Industry and Mineral Resources actively works to boost mineral production and investment. 

Saudi weekly POS spending hits $3bn, driven by hotel sector surge

Saudi weekly POS spending hits $3bn, driven by hotel sector surge
Updated 17 July 2024

Saudi weekly POS spending hits $3bn, driven by hotel sector surge

Saudi weekly POS spending hits $3bn, driven by hotel sector surge
  • Payments in restaurants and cafe held the largest share of POS transactions

RIYADH: Saudi Arabia’s point-of-sale spending totaled SR11.9 billion ($3.19 billion) from July 7 to 13, driven by a 3.8 percent weekly surge in hotel sector transactions, official data showed.

The latest data from the Saudi Central Bank, also known as SAMA, revealed that the hospitality industry showed the only increase during the week, with total transaction values reaching SR269.6 million. 

Point-of-sale is where transactions between merchants and customers take place, using systems like cash registers or digital terminals to manage sales and payments. 

Saudi Arabia’s apex bank releases weekly POS data to provide insights into consumer spending patterns, economic activity, and trends in various sectors such as retail, hospitality, and services. 

During the seven-day period starting July 7, POS transactions in the Kingdom declined by 9.8 percent, reversing from an increase in the previous week, to reach SR13.2 billion.  

Data from SAMA indicated that payments in restaurants and cafes decreased by 6.4 percent compared to the previous week, totaling SR1.84 billion, while still holding the largest share of POS transactions. 

Expenses on food and beverages dipped by 12.5 percent to reach SR1.79 billion, the third-largest fall compared to the previous week.  

Miscellaneous goods and services came in third place in spending size, recording an 11.2 percent dip, reaching SR1.57 billion. 

Gas stations witnessed the smallest dip this week, recording a 3.2 percent decrease, reaching SR841.4 million.  

Construction and building materials experienced the second-smallest drop in POS transaction value, diminished by 4.7 percent to SR329.7 million. Furthermore, expenses on transportation witnessed the third-smallest surge, with a 5.6 percent decrease, reaching SR733.1 million. 

According to data from SAMA, 33.37 percent of POS deals occurred in Riyadh, with the total transaction value reaching SR3.91 billion, representing an 8.3 percent decline from the previous week when it was SR4.26 billion. 

Riyadh has expanded into a major growth hub, with Spinneys recently debuting its flagship 43,520 sq. ft. outlet at La Strada Yard, marking the start of its expansion in the capital and Jeddah to meet the increasing demand for high-quality groceries in Saudi Arabia.  

In Jeddah, purchases accounted for 14.6 percent of the total, amounting to SR1.71 billion, reflecting an 8 percent weekly decrease, the third-largest decline compared to the previous week.  

Expenditures in Abha and Makkah declined by 4.8 percent and 4.2 percent, reaching SR224.2 million and SR459.5 million, respectively. 

The highest fall was spotted in Tabouk with a 12.8 percent weekly change, reaching SR216.2 million.