It’s quite possible that Turkey can get funds through a debt deal with the Fed and the IMF. But, apparently, we are avoiding doing that.
However, the Fed has recently signed a SWAP deal of 60 billion USD with the Indonesian Central Bank. Obviously the Fed hasn’t said, “First, bring me your money and then you can take my money”. Of course, there are certain terms and conditions set forth by this agreement. But we should also not forget that Indonesian Economy is a powerful one and a current candidate for becoming the world’s 4th largest economy by 2050. No one in their sane mind would leave such promising economy to rot.
So, it’s perfectly possible for Turkey as well to strike a SWAP deal for 20 billion USD with the Fed. We may even ask for 8 to 10 billion USD funding from the IMF. Turkey has every right to do it. And the annual cost of this financing will be 1.5%. But, for some reason, Turkish government abstains from receiving external funds. So, I decided to make a little research to found out why.
When we take a closer look at the CBRT’s figures, we can see that the emission has exceeded 50 billion over the last three years. The total amount of money in circulation is 171 billion TRY. Not only the CBRT, but banking and finance sector seem to have generated a large amount of money. For the last three years, there’s been an increase around 1 trillion TRY, nearing 3 trillion in total. Well, it can be seen that this isn’t about the amount of money, but it’s about the liquidity, which means there’s no cash in markets at the moment.
The reason why CBRT prints money is obvious: It increases emission to cover public debt since the treasury is empty. It gives the money to the government and then launches a difficult operation to collect that money. It sells foreign currency to markets for fear that the money that was printed before would stay idle and be spent on buying foreign currency, thus preventing FX rates from soaring and succeeding at recovering the money it had printed. But this is a though process indeed. A process that both kills productivity and creativity… CBRT’s reserves are getting thinner every day. If we keep interfering with the system, we might see it broken down one day.
“Never say give me your hand, always say take my hand…”
The terms and conditions set out with regard to receiving funds from the IMF and the Fed revolve around the economic methodology as well as its philosophy. For instance, “Central Banks should be independent” they say. CBRT is supposedly independent, so to peak. Well, it doesn’t seem quite independent to foreign eyes. You can’t win this argument of autonomy given the fact that all actors in economy, sports, arts, energy, banking and even regulatory authorities seem compelled to obey the orders of Turkish President. So, it doesn’t matter whether I say, “We can’t take the money” or “we don’t take the money” as either of these statements would be true. No one wants to leave a country like Turkey alone but we are acting in a rather ridiculous way for some reason, just like a funny Muslim clergyman character from Turkey’s Black Sea region.
As the story has it, this cleric was drowning in the sea. One of the men in the boat was trying to reach him, crying “Give me your hand!” But the cleric was avoiding holding his hand for some reason. Couldn’t stand it anymore, another man on the boat said, “When you’re talking to him, never say ‘give me your hand’, but always say, ‘take my hand’”
Apparently, we will have to print money to give ourselves money as we are waiting for others come and say to us, “Take my hand!” even under these terrible circumstances, because according to Turkish government, asking the IMF or the Fed for funding will cause them to lose voters’ confidence or it will harm their reputation.
Turkey will eventually stand on its two own feet when some of the people in this country financially collapse. Then, the government will come out and proudly say, “We are standing strong once again with no help from nobody” But innocent people will lose their jobs and their businesses in the process.