Turkey targets tax, price increases to diminish inflationary impact: bankers
January 5, 2021, 1:17 pm

Turkey targets tax, price increases to diminish inflationary impact: bankers

A man counts Turkish lira banknotes in Istanbul, Turkey. (Reuters)

Turkish authorities are raising taxes and prices for 2021 only on items that would have a limited impact on inflation, two bankers said on Tuesday.

Inflation ended 2020 above government forecasts at 14.6 percent, mainly due to a sharp decline in the lira and surging food prices. The central bank has lifted its policy rate by 675 basis points in its last two meetings to 17 percent, as it aims to bring inflation down to 9.4 percent by the end of 2021.

Bankers said the government, in a departure from previous years, is hiking taxes and prices on items that account for only a small portion of the inflation basket.

Ankara has recently lowered tax on tobacco products, which account for 5.71 percent of the inflation basket, while increasing tax on alcoholic beverages or highway tolls, which have a much lower weighting, by 17-26 percent.

“We are seeing that the state is moving its price hikes to areas that will not have an impact on inflation,” one banker said, adding that the strategy would support the central bank’s disinflationary policy with only a limited impact on the budget.

A second banker said only the 21.56 percent rise in gross minimum wage this year would increase inflation, while for all other decisions, inflation was the “sole determinant.”

Turkey’s EPDK energy regulator hiked the price of electricity for consumers by around 6 percent, which would add 17 basis points to inflation in January.

Central Bank of Turkey (Reuters).

BOTAS, Turkey’s state natural gas distribution company, raised the price on natural gas for some users by 1 percent, which would contribute another 2 basis points to inflation.

Inflation is expected to continue rising in the first four months of 2021 but start to decline afterwards. Governor Naci Agbal has said the central bank’s main aim is price stability, and that it will also work to build its reserves transparently.

The bank sold off an estimated $130 billion to stabilize the ailing lira, which ended last year down some 20 percent, leading to a drawdown in net forex reserves.

Data from the central bank showed it had outstanding swap transactions worth a total of $44.04 billion as of Monday.

The bank’s net forex reserves stood at $15.53 billion on December 25, down from $41 billion at end-2019, meaning they are now in deeply negative territory once the outstanding swaps are deducted.

source: Reuters

Image source: Reuters

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BENEFIT, the Kingdom’s innovator and leading company in Fintech and electronic financial transactions service, held its Annual General Meeting (AGM) at the company’s headquarters in the Seef District.
During the meeting, shareholders approved all items listed on the agenda, including the ratification of the minutes of the previous AGM held on 26 March 2024. The session reviewed and approved the Board’s Annual Report on the company’s activities and financial performance for the fiscal year ended 31 December 2024, and the shareholders expressed their satisfaction with the company’s operational and financial results during the reporting period.
The meeting also reviewed the Independent External Auditor’s Report on the company’s consolidated financial statements for the year ended 31 December 2024. Subsequently, the shareholders approved the audited financial statements for the fiscal year. Based on the Board’s recommendation, the shareholders approved the distribution of a cash dividend equivalent to 10% of the paid-up share capital.
Furthermore, the shareholders endorsed the allocation of a total amount of BD 172,500 as remuneration to the members of the Board for the year ended 31 December 2024, subject to prior clearance by related authorities.
The extension of the current composition of the Board was approved, which includes ten members and one CBB observer, for a further six-month term, expiring in September 2025, pending no objection from the CBB.
The meeting reviewed and approved the Corporate Governance Report for 2024, which affirmed the company’s full compliance with the corporate governance directives issued by the CBB and other applicable regulatory frameworks. The AGM absolved the Board Members of liability for any of their actions during the year ending on 31st December 2024, in accordance with the Commercial Companies Law.
In alignment with regulatory requirements, the session approved the reappointment of Ernst & Young (EY) as the company’s External Auditors for the fiscal year 2025, covering both the parent company and its subsidiaries—Sinnad and Bahrain FinTech Bay. The Board was authorised to determine the external auditors’ professional fees, subject to approval from the CBB, and the meeting concluded with a discussion of any additional issues as per Article (207) of the Commercial Companies Law.
Speaking on the company’s performance, Mr. Mohamed Al Bastaki, Chairman BENEFIT , stated: “In terms of the financial results for 2024, I am pleased to say that the year gone by has also been proved to be a success in delivering tangible results. Growth rate for 2024 was 19 per cent. Revenue for the year was BD 17 M (US$ 45.3 Million) and net profit was 2 Million ($ 5.3 Million).

Mr. Al Bastaki also announced that the Board had formally adopted a new three-year strategic roadmap to commence in 2025. The strategy encompasses a phased international expansion, optimisation of internal operations, enhanced revenue diversification, long-term sustainability initiatives, and the advancement of innovation and digital transformation initiatives across all service lines.
“I extend my sincere appreciation to the CBB for its continued support of BENEFIT and its pivotal role in fostering a stable and progressive regulatory environment for the Kingdom’s banking and financial sector—an environment that has significantly reinforced Bahrain’s standing as a leading financial hub in the region,” said Mr. Al Bastaki. “I would also like to thank our partner banks and valued customers for their trust, and our shareholders for their ongoing encouragement. The achievements of 2024 set a strong precedent, and I am confident they will serve as a foundation for yet another successful and impactful year ahead.”
Chief Executive of BENEFIT; Mr. Abdulwahed AlJanahi commented, “The year 2024 represented another pivotal chapter in BENEFIT ’s evolution. We achieved substantial progress in advancing our digital strategy across multiple sectors, while reinforcing our long-term commitment to the development of Bahrain’s financial services and payments landscape. Throughout the year, we remained firmly aligned with our objective of delivering measurable value to our shareholders, strategic partners, and customers. At the same time, we continued to play an active role in enabling Bahrain’s digital economy by introducing innovative solutions and service enhancements that directly address market needs and future opportunities.”
Mr. AlJanahi affirmed that BENEFIT has successfully developed a robust and well-integrated payment network that connects individuals and businesses across Bahrain, accelerating the adoption of emerging technologies in the banking and financial services sector and reinforcing Bahrain’s position as a growing fintech hub, and added, “Our achievements of the past year reflect a long-term vision to establish a resilient electronic payment infrastructure that supports the Kingdom’s digital economy. Key developments in 2024 included the implementation of central authentication for open banking via BENEFIT Pay”
Mr. AlJanahi concluded by thanking the Board for its strategic direction, the company’s staff for their continued dedication, and the Central Bank of Bahrain, member banks, and shareholders for their valuable partnership and confidence in the company’s long-term vision.