Turkey doubles transaction tax on consumer loans to 10%

Turkey raised the tax on consumer loans amid soaring inflation and as authorities stepped up measures to strengthen the lira.

The rate of tax on banking and insurance transactions on consumer loans has been raised to 10% from 5%, according to a press release published in the Official Journal on Saturday.

The move follows a series of measures announced recently to support the lira, which has fallen 23% this year amid soaring prices and is the worst performing emerging market currency.

On Thursday, the banking regulator, also known as BDDK, slashed consumer debt repayment times, while increasing the minimum required monthly payment on credit cards.

Turkish inflation soared to 73.5% in May, its highest level in 24 years.

The Turkish lira weakened to 17.24 to the dollar on Friday, from 17.2 on Thursday. The lira is heading for the record low of 18.4 it hit on December 20 during a currency crisis triggered by a series of unorthodox interest rate cuts.

The Turkish government has said it will keep the benchmark interest rate at 14% despite soaring inflation. Inflation soared to 73.5% in May last year.

"Turkey's inflation is expected to be at 48-49 percent by the end of this year," Turkish Finance Minister Nureddin Nebati said.

Turkey's trade deficit jumped 157% year-on-year in May to $10.68 billion, the Commerce Ministry said on Thursday, as soaring energy import costs continue to widen the deficit.