Dec 21, 2021: Turkey’s beleagured lira fell another 5 percent against the dollar on Monday after President Recep Tayyip Erdogan cited Muslim teachings to justify not raising interest rates to stabilize the currency.

Despite an annual inflation rate of more than 20 percent, Erdogan has forced the central bank to sharply reduce the cost of borrowing. Economists believe the policy could see consumer prices rise by 30% or more in the coming months.

But Erdogan said in remarks aired on state television late on Sunday that his Muslim faith had prevented him from supporting the rate hike.

“They complain we keep decreasing the interest rate. Don’t expect anything else from me, as a Muslim, I will continue doing what our religion tells us. This is the command.”

Islamic teaching forbids Muslims from or receiving interest on loans or borrowed money. Erdogan first referred to his Muslim faith in explaining why he thinks interest rates lead to inflation rather than reducing it. High interest rates drag on activity and slow down economic growth. But when inflation gets out of hand, central banks raise their policy rates too much.

The Turkish lira has lost almost half its value in the last three months. It was trading down about 6pc on Monday morning.

One dollar can buy 7.4 lira on January 1. It was priced at 7.4 lira on Monday.

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