Yes, we can. The meeting hosted by TIM (Turkish Exporters’ Assembly) where I acted as moderator helped me get utterly convinced that this is doable. But you need specific conditions to be met.
As far as I can understand, CBRT has reached partial agreement with the central banks of some of the world countries so far despite its constantly interrupted talks with the others.
On the other hand, it is of the utmost importance that we should avoid defining “trade in local currency” as parities calculated by making dollar a denominator and properly understand how to set currency exchange rates based on bilateral agreements. For now, discussions are mostly focused on a system where Ruble/TRY or Yuan/TRY rates will be calculated through USD/TRY and USD/Yuan and USD/Ruble parities. However, this is not the system we wish to establish. First of all, we should come to a mutual understanding in terms of the philosophy of trading in local currency.
Besides, we have to win over institutions and public opinion in our top trading partner countries as much as we should win over Turkish public opinion. Although Russians seem quite eager to put this new system into practice soon, the hesitation of Russian Business World does not go unnoticed either.
Apparently, besides central banks, banks too are putting efforts into this by offering valued experience. However, banking professionals are stating that they are experiencing difficulties in spreading trade in local currency due to correspondent bank issues.
Pointing out that TRY’s constant volatility makes trading partners confused, consequently leading them to prefer Euro and Dollar as medium of exchange, a great deal of meeting participants believes that it’s not the right time to launch this “trade in local currency” system, especially in a period where Turkish lira keeps depreciating against dollar.
Firms engaged in import and export activities have also underlined that such sharp fluctuations in Turkish lira are bringing financial losses. Accordingly, I suggest Turkish economy administration to start and run meticulously planned pilot projects with one or more countries. I think it would be a more rational to start implementing this system working only with a selected few, not with each and every partner.
“New options are needed for foreign trade…”
Some of the participants seemed quite concerned whether trading in local currency will bring or not positive outcomes. However, consensus was reached about the possibility that the “Trading in Local Currency” project may be considered an option for financing foreign trade. On the other hand, participants seemed to agree that the obligation for trading in dollar and euro, which is one the major barriers to international trade, must be minimised. I believe that questions and hesitations will slowly start to disappear one the operation rules and principles of the system is revealed.
Referring to the Decree No.32, meeting participants declared, “The Government should consult with us first before drawing up any regulation”. Indicating that any regulation and practices on “Trading in Local Currencies” should absolutely be prepared in coordination with the business world, participants especially asked the Ministry of Trade to closely monitor the foreign trade related regulations that are currently being prepared by other Ministries.
In light of all the fact mentioned above, the first steps we should be taking are: hold more meetings with business world and other shareholders to further discuss the Trading in Local Currency issue; clearly explain how the system will work; launch and run a pilot project comprising a few selected trade partners; start expanding the system to each sector slowly, inspiring from great examples of successful trading in local currency.
In short, “Trade in Local Currency” is not a backup plan to provide protection against the US Dollar, but it is an option for carrying out international trade activities. It is perfectly doable if parties achieve consensus. As I applaud the Ministry of Trade’s dedicated efforts into this project, I expect CBRT to also contribute greatly. Especially, with tremendous efforts and hard work of Arzu Yılmaz and her team, I believe this project will be an alternative solution to the problems of import-export professionals.