Turkey has been facing severe economic challenges since 2018. The crisis began on August 10, 2018, when the Turkish Lira collapsed due to political tensions with the United States.
The Reserve Bank of India (RBI) has announced a major move to boost the economy by cutting the repo rate by 50 basis points. With this latest cut, the policy rate in India now stands at 5.5%. This is expected to bring down the cost of all kinds of loans—whether home, car, or personal—making borrowing more affordable for the common people. The repo rate is the rate at which the RBI lends money to other banks. A lower repo rate means banks will get money at a cheaper rate from the RBI, and in turn, they may pass on the benefit to customers by lowering loan interest rates.
Even after the cut, India still ranks among the countries with relatively high policy rates. Globally, only six countries have higher policy rates than India.
Turkey (also known as Türkiye), a close ally of Pakistan, tops the list with a staggering 46% interest rate—the highest in the world. Turkey has been facing severe economic challenges since 2018. The crisis began on August 10, 2018, when the Turkish Lira collapsed due to political tensions with the United States. Within 47 days, the Lira lost 35% of its value against the dollar. This led to a stock market crash and made loans extremely costly. Sanctions by then US President Donald Trump added to Turkey’s economic problems, and the country has been struggling ever since.
Following Turkey is Argentina with a policy rate of 29%, as the country battles long-term inflation. Russia, currently involved in a war with Ukraine, has a policy rate of 20%. Brazil’s rate is 14.75%, while Mexico’s stands at 8.5%. South Africa has a policy rate of 7.25%.
Interestingly, Indonesia, the world’s most populous Muslim-majority country, shares the same policy rate as India—5.5%.
Other countries have much lower rates: Saudi Arabia (5%), the USA (4.5%), the UK (4.25%), Australia (3.85%), China (3%), Canada (2.75%), South Korea (2.5%), Eurozone (2.15%), Singapore (1.46%), Japan (0.5%), and Switzerland (0.25%).
With India now cutting its repo rate, the hope is that it will stimulate economic activity, boost spending, and provide relief to millions of borrowers.