Turkey, a close ally of Pakistan, currently boasts the world's highest interest rates. Turkey's economic crisis began on August 10, 2018, when a dispute with the United States caused its currency, the lira, to plummet.
Turkey: While many countries, including India, are experiencing declining interest rates, Turkey, a close friend of Pakistan, is grappling with a severe economic crisis. Turkey's central bank rate (policy rate) currently stands at 46%, the highest globally. This figure is approximately nine times higher than India's rate of 5.5%. Turkey's economic woes have persisted since 2018, when political tensions with the United States led to a sharp devaluation of its currency, the lira. Since then, the country has continuously struggled for economic recovery, ironically mirroring the path of its "brother" Pakistan, which is teetering on the brink of bankruptcy.
The Beginning of the Crisis in Turkey: A Quarrel with the US Deals a Crushing Blow
Turkey's economic downturn began on August 10, 2018, when then-US President Donald Trump imposed economic sanctions on Turkey. This was in response to Turkey's arrest of a US pastor on US soil. Trump increased tariffs on Turkish steel and aluminum, leading to a significant devaluation of the Turkish lira. In just 47 days, the lira fell by 35% against the dollar. Since then, Turkey has failed to recover.
This crisis severely impacted the lives of ordinary Turks. Inflation soared, unemployment rose, and obtaining bank loans became exceedingly difficult. Today, Turkey's high interest rates deter both businesses and individuals from borrowing.
Global Interest Rates: Turkey at the Top, India's Situation Better
After Turkey (46%), Argentina (29%), grappling with long-term economic instability, has the second-highest interest rate globally. Russia (20%), facing economic sanctions due to the war in Ukraine, follows. Brazil (14.75%), Mexico (8.5%), and South Africa (7.25%) also have relatively high interest rates.
In contrast, the Reserve Bank of India recently reduced its repo rate by 50 basis points, bringing it down to 5.5%. This rate is only slightly higher than that of the US (4.5%), the UK (4.25%), and Saudi Arabia (5%). Countries like China (3%), Japan (0.5%), and Switzerland (0.25%) have significantly lower interest rates, reflecting their stable economies.
Is Pakistan Following in Turkey's Footsteps?
Like Turkey, Pakistan is facing a severe economic crisis. The Pakistani rupee is continuously depreciating, and the country is on the verge of bankruptcy. Despite b political ties with Turkey, both nations share a similar economic predicament. Despite receiving aid from the International Monetary Fund (IMF), Pakistan's situation remains unchanged.
