Türkiye’s ruling Justice and Development Party (AK Party) is preparing a draft law to let people and companies restructure debt with public institutions, the country’s president said Monday, one of a string of eye-catching measures promised ahead of elections.
The changes would waive late payment fees incurred over unpaid tax bills, social security debt and other liabilities, President Recep Tayyip Erdoğan said in a televised address after a Cabinet meeting.
It would also let individuals and companies pay outstanding debts in installments after restructuring at a certain rate, he added.
"We are preparing a draft law that will restructure public receivables of institutions such as tax offices, customs offices, social security institutions and municipalities," Erdoğan said.
The announcement came as Türkiye heads for parliamentary and presidential elections that are expected to be held on May 14.
“We are forgiving debt not exceeding TL 2,000 ($106), predating to Dec. 31, 2022, owed to tax offices,” Erdoğan said. He stressed the bill would extend to some traffic penalties and fines owed to public institutions.
Last week, broadcaster NTV and other media reported that the government is planning to offer a wide-ranging restructuring package to citizens.
Türkiye provided almost $16 billion in tax relief last year, Treasury and Finance Minister Nureddin Nebati has said.
The government has already ramped up spending, including dropping a retirement age requirement for millions and substantial hikes to minimum wage and pensions, to ease the economic pressure on households, driven by stubborn inflation.
Consumer prices in Türkiye have moderated over the last two months after hitting a 24-year high in October and inflation in December decelerated at its steepest pace in more than a quarter century.
Annual inflation fell to 64.27% last month from the 84.39% reported in November. The decline was driven mainly by the so-called favorable base effect and marked a second straight fall after inflation hit a peak of 85.5% in October.
Erdoğan said the decline would gain further pace in the coming period, noting that they expect inflation to rapidly drop to around 50% next month, before eventually falling to some 30%.
The minimum wage has been increased by 55% for 2023 and Erdoğan said it may be hiked again throughout the year if necessary.
Erdoğan also announced a measure that would allow more than 2 million people to retire early. Labor and Social Security Minister Vedat Bilgin on Tuesday said the new system could cost around TL 150 billion this year.
The government has endorsed low interest rates to boost exports, production and investment and create new jobs as part of an economic program, eventually aimed at lowering inflation by flipping the country’s chronic current account deficit to a surplus.
Last year, the country’s central bank slashed its benchmark policy rate by 5 percentage points to 9%, citing the signs of economic slowdown. It held the key policy rate unchanged in its first meeting of the year on Thursday.
Erdoğan says high rates cause inflation and has said the government’s new economic model is expected to yield results this year.
The government last year introduced several relief measures to help cushion the fallout from inflation, including a cap on rent increases, reduced taxes on utility bills and the unveiling of a major housing project for low-income families.
