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Turkey Plans Energy Tariff Reforms to Address Income Disparities

Turkey Plans Sliding Scale Energy Tariffs to Ease Burden on Low-Income Households Amid Inflation Challenges

By Athena Xu

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5/8, 07:29 EDT
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Key Takeaway

  • Turkey plans energy tariff reforms targeting higher bills for wealthier households to ease lower-income burdens.
  • The government previously offered free natural gas to 20 million households, a campaign that ended on May 1.
  • Inflation, nearing 70% in April, may rise further with the end of free gas, though it's expected to decline by year-end.

Energy Tariff Reforms

Turkey is in the process of designing a new energy tariff system that aims to differentiate between various income groups. This initiative, spearheaded by the Ministry of Energy and Natural Resources, seeks to introduce a sliding scale for natural gas and electricity charges. The plan, which has been under development for some time, is intended to alleviate the financial burden on lower-income households by offering them lower bills. According to a senior official familiar with the matter, the proposed structure would see energy tariffs increase in tandem with either income levels or consumption rates.

Support for Lower-Income Households

The government's strategy to modify energy tariffs is part of a broader effort to provide economic relief to its citizens, particularly those with limited financial resources. President Recep Tayyip Erdogan's administration had previously committed to supplying up to 25 cubic meters of natural gas per month free of charge to approximately 20 million households. This initiative was part of a campaign to garner support ahead of critical elections last year. However, this benefit concluded on May 1, leading to speculations about its impact on the cost of living and inflation.

Inflationary Pressures

Turkey has been grappling with soaring inflation rates, which hit nearly 70% in April, marking the highest increase in over a year. The cessation of free natural gas provision is expected to exert additional inflationary pressures, potentially adding 0.7 percentage points to the monthly inflation rate. Despite these challenges, the central bank remains optimistic, forecasting that inflation will reach its zenith in May before embarking on a downward trajectory. The year-end inflation rate is projected to stabilize at 36%, indicating a gradual easing of the economic strain on Turkish citizens.