As recent events in Turkey takes the country by storm, USD/TRY and benchmark rate continue to climb up gradually. Turkey’s monetary authority, the CBRT, is continuously making efforts to prevent lira from depreciating.
Let’s take a look at what Central Bank’s measures regarding both TRY and foreign currency actually mean:
- Those in need of foreign currency should come to me
- I don’t intend to inject too much lira into the market. So, I’m going to change the rules constantly.
Although Central Bank doesn’t want to repeat the mistakes it made during 1994 and 2001 crises, it almost looks unaware of the fact that it may cause unwanted side effects by limiting the amount ıf lira in the market. I must warn you however that we might witness a swift climb in both interest rates and exchange rates.
I’d like to remind you once again of the fact that an automatic rise in interest rates won’t result in a fall in exchange rates. Here are some reasons lying behind Central Bank’s efforts to calm the exchange rates down through a series of rates hikes: It might either want to avoid Ankara’s reaction in case of a rate hike or it just isn’t positive that exchange rate will not be soothed whether it hikes the rates or not.
Turkey faces new tensions every day, from conflicts with NATO, the US and Germany to the ongoing combats in the Middle East. The real problem in Turkey, however, is the current growth model is not appealing to investors in any way. Even if Turkey hits double digit growth, Turkish economy won’t inspire anyone as long as overwhelming troubles such as unemployment, inflation, exchange rates, interest rates, savings gap, tax rates, low value-added activities, current account deficit, and budget deficit remain unsolved.
Meanwhile, during a meeting for which I served as moderator yesterday, I had the chance to look through the import incentives. And surprisingly I realized that private sector is just unaware of the numerous and various financial incentives offered by the Ministry of Economy. Finally, I came to the conclusion that there are just so many incentives out there that companies can’t even decide which one to apply for.
All of this shows that the Government must to lead companies along the proper way so they can learn about how to benefit from these incentives. Saying, “Here they are! Go and grab them!” is doesn’t sound very convincing. Giving the companies what they want is not enough; you also have to guide them along the right path.
There’s “no real incentive” if only a few people are able to use it properly.
