Real interests display an upward trend in countries with high public debt stock, whereas they are low in countries with modest public debt stock. High public debt stock and concerns about the sustainability of public finance cause a direct rise in risk premiums and this leads to high real interests rates. Although tough measures had been implemented several times prior to the 2001 crisis, strict discipline could not be established in public finance and the public deficit was mostly met by borrowing. Hence, along with the operations conducted in the banking sector after the 2001 crisis, the ratio of net public debt stock to national income recorded its highest level of 91 percent in 2001. In fact, many developing or developed countries can attain this ratio in the long run. However, until recently, sustainability of public debt had been a considerable problem on Turkey’s agenda. This problem derived from the size of short-term debts, high real interest rates and doubts about policies that were being implemented at the time. We targeted a high primary surplus comprising the 6.5 percent of the national income and reached our goals in the framework of the stability program, which has been implemented for the last three years. The same target has been set for the year 2005, as well. Thus, the commitment to continue the programme of tight fiscal policy has been strengthened. As a result of these achievements, significant developments were made in public debt dynamics in the last three years.
At this point, it is important to underline once more the damage caused by high inflation in order to remind us why should do everything in our power to stick to the price stability objective. This is especially important in an environment where the benefits of overcoming inflation are not yet fully understood. The consequences of failure to maintain price stability, in other words, the damage caused by inflation, can be clearly seen in our country both in society and in the economy, as is the case in all countries that have experienced high and chronic inflation. High inflation, one of the main reasons for poverty, depravation, unfair distribution of income, and the economic instability environment it creates has been one of the most influential impacts of inflation on society. The legacy of inflation on poverty, depravation and the unfair distribution of income have been clearly felt by society. Another effect of high inflation, which manifested itself in the short-term in society, is that of immoral behavior. High inflation led to moral corruption in our country. While Turkey ranked low in fields such as infrastructure, education, health and the fair distribution of income in international development indicators, it ranked high in indices of corruption. Another factor worth mentioning in this context is the relationship between high inflation and political instability. Shortsighted policies by political instability and the resulting inflation as a result have  BIS Review 36/2005  1  featured several times in economic literature.