There are fears that Turkey’s latest attempts to boost the lira will have long-term negative effects on the economy.
On Wednesday, the Turkish Central Bank released the new foreign exchange rates to be used as a basis for a new scheme introduced to protect Turkish Lira deposit accounts against fluctuations in the exchange markets, Turkish daily Hurriyet reported.
The latest rates for deposit accounts for buying US dollar/lira was 12.35 and 12.37 for selling, while the rates were 13.9 and 13.93 for the euro, respectively. Exchange rates will be released by the bank every morning.
The lira rose by around 40 percent against foreign currency following President Recep Tayyip Erdoğan’s announcement about the new deposit account scheme on Monday, 20 December.
On Thursday, Yeniduzen published an article questioning whether the scheme would be adopted by the TRNC banks.
North Cyprus, which also uses the Turkish lira as currency, has suffered the same impact of inflation, rising costs and shortage of goods as Turkey.
Yeniduzen writes that in North Cyprus, no explanation has been made about what the application will be in local banks and branches.
Economic experts have argued that this is a temporary solution, but with the uncertainties it brings, it can create a much larger economic ‘disequilibrium’ in the market.
Economists told Yeniduzen how this ‘unbalanced course’ would be reflected in the market. Explaining that this step can temporarily stop the depreciation of the Turkish Lira against foreign currency, but it will not create a permanent solution, and uncertainty will discourage people from investment and that the market will stagnate.
The report said: “Economist Mahmut Sezinler claimed that there are not many examples of the decision taken globally and that the last time a similar decision was made in 1970, the treasury went bankrupt. Arguing that the fluctuation in foreign currency with this new decision eliminates economic predictability, Sezinler noted that this will also prevent the economy from finding its own balance”.