Turks initially paid a tax of 2.52 lira per liter of petrol, or less than 9 euro cents. This has now almost tripled to 7.52 lira per liter, while the tax on diesel has risen from 2.05 lira to 7.05 lira. As the tax goes up, the VAT will also increase, so motorists will pay around 6 liras extra for every liter at the pump. This will make fuel about 20 percent more expensive.
The Turkish government could use the extra income due to the massive damage caused by the earthquakes. This disaster, which claimed more than 50,000 lives, is estimated to cost Turkey more than $100 billion. So the government wants to be able to spend a lot of extra money this year. Turkey’s parliament approved a budget plan for that on Saturday.
But Türkiye has been suffering from very high inflation for some time now. According to the latest numbers, prices across the board are 38 percent higher than they were a year ago. This is less extreme than the nearly 90 percent inflation of the past few months. But this decline has been caused in part by all kinds of benefits offered by President Recep Tayyip Erdogan in the run-up to the presidential elections in May. The latter is also one of the reasons for the increase in the budget deficit, as a result of which the government now needs additional funds.
For years, Türkiye has done little to control inflation in the country. What matters is that the Turkish president did not believe in the usual economic practice of raising interest rates to curb inflation. Instead, he hoped to attract investment and thus boost the economy.
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