People walk past a board showing the currency exchange rates outside an exchange office in Istanbul, Turkey December 17, 2021. Photo: REUTERS/Dilara Senkaya

Turkey’s largest business group urged President Tayyip Erdogan’s government on Saturday to abandon a monetary policy based on low rates that has prompted a crash in the lira, and called for a return to “rules of economic science.”

The lira hit a record low beyond 17 against the US dollar on Friday following fears of an inflationary spiral brought on by Erdogan’s new policy in the face of soaring prices.

At the low, the currency had lost some 55% of its value this year, including 37% in the last 30 days.

The TUSIAD business group said it had warned the government of the negative impacts of the low-rates policy, and that the economic woes were harming businesses and citizens.

“As a result of the instability we have been experiencing in recent times, it has become clear that goals under this economic program that is being attempted will not be achieved,” it said in a statement.

It said “an environment of distrust and instability has been created” and the economic model risked causing “much bigger” problems in the future.

“Even exports, expected to benefit the most from this, have been harmed under this environment,” it said.

Under pressure from Erdogan, the central bank has cut rates by 500 basis points since September. Erdogan has said the new model will boost exports, employment and investments. Economists have called his experiment “reckless.”

Devlet Bahceli, an Erdogan ally and leader of the nationalist party MHP, dismissed the “problematic” statement by TUSIAD and said the new economic policy would succeed despite a “siege” on the economy.

But Kemal Kilicdaroglu, leader of the main opposition Republican People’s Party (CHP) repeated a call for immediate elections and Meral Aksener, Chairwoman of another party, Iyi, said on Friday that Erdogan should resign.

“You have no fear of God, we understand, but at least have shame in front of people,” she wrote on Twitter. Erdogan has announced an increase in the minimum wage that is widely expected to boost overall consumer price inflation by 3.5 to 10 percentage points. Economists expect inflation to soar beyond 30% next year.

Bakery worker Zeki Erdogan said the planned increase in the minimum wage was insufficient.

“It is really hard to make a living and pay the rent, gas, electricity, and water bills with 4,250 lira per month,” he added. “The future is not bright.”