Turkey's national currency, the lira, slumped further and hit a new low, after President Recep Tayyip Erdogan insisted he would not raise interest rates to cope with soaring inflation as it goes against his beliefs as a Muslim. In trading on Monday (20/12), the lira fell another 5% against the US dollar. With this decline, the value of the lira has fallen by about two-thirds over the past month alone. But in a speech broadcast on Sunday evening local time (19/12), President Erdogan underlined that as a Muslim he does not support raising interest rates.

"They complain that we continue to cut interest rates. Don't expect anything else from me," he stressed.

"As a Muslim, I will continue to follow the teachings of our religion. This is an order."

Under Islamic law, Muslims are prohibited from receiving or collecting interest on loans

Although the lira's decline has continued to bottom this week, Turkey's long-ruling leader has maintained his approach of "self-sufficient economic warfare" supported by low interest rates.

So why has President Erdogan defended the model, which critics say risks hoisting inflation, unemployment and poverty levels, and what does that mean for Turkish citizens?

The following is a report compiled by BBC Turkey's Ozge Ozdemir.

Unusual policy

The simple reason for the slump in the lira is the unusual economic policy taken by Erdogan, namely maintaining low interest rates to boost Turkey's economic growth and export potential with a competitive exchange rate.

For many economists, if inflation goes up, what they do to control it is to raise interest rates. But President Erdogan views interest rates as "a vice that makes the rich richer and the poor poorer."

"Everything is expensive," Sevim Yildirim told the BBC at a fruit market. "At a price like this, it's impossible to provide a main meal for the family."

Annual inflation rose above 21% in Turkey, but the Central Bank of the Republic of Turkey, controlled by Erdogan, only lowered interest rates from 16% to 15%, the third cut this year.

Inflation is rising around the world, and central banks in each country are talking about raising interest rates. Not so in Turkey, as President Erdoan believes inflation will eventually come down.

In the space of two years he has sacked three central bank presidents and only this week he replaced the finance minister. So the lira continues to decline.

Turkish President, Recep Tayyip Erdogan

Turkish President, Recep Tayyip ErdoganPrice skyrocketed

Turkey's economy depends on imports to produce goods ranging from food to textiles, so an increase in the value of the dollar has a direct impact on the prices of essential goods.

For example tomatoes, an important ingredient in Turkish cuisine. To grow tomatoes, farmers need gas and fertilizer which must be imported.

Tomato prices rose 75 percent in August from prices a year earlier, according to the Chamber of Commerce in Antalya, an agricultural center on the southern coast.

"How can we profit in these conditions?" asked Sadiye Kaleci, who grows grapes in Pamukova, a small town about three hours' drive from Istanbul.

"We sell at a low price, the purchase price is high," complained the woman. For his vines, he needs to buy diesel, fertilizer and sulfur.

Another farmer, Feride Tufan, admits the only way to survive is to sell his assets: "We paid off the debt by selling our land and vineyards. But if we sell everything, we have nothing left."

The lira is so volatile that prices change every day.

"I have reduced all expenses," said Hakan Ayran while shopping at the market. "To cover everyone's needs eat less and no one goes shopping."

Supermarket employees posted price increases on social media, showing past and current prices.

Items vary such as margarine (above) and olive oil, tea, coffee, laundry soap and toilet paper.

A bakery in Turkey's third-largest city, Izmir, posted a notice to explain the price increase by listing the increased prices of necessary ingredients such as flour, oil and sesame. The announcement concluded with the words: "May God be with us."

Currency denominated in foreign currencies is a problem for the private sector and most companies hold their products in storage because it is more profitable than selling them, due to the volatility of the lira and inflation.

All of this adds to poverty and widens the income and wealth gap.