Inefficiency is a Sickness…
As the week starts, let’s take a look at the CBRT’s statements from last week.
Undoubtedly, the Central Bank’s statements about the real sector and banking sector were directed at the international institutions, not at the domestic economy. The CBRT executives want to manipulate the public perception by making statements like “things are going well”, based on their available the data set. Central banks can indeed affect rational expectations. However, the CBRT is risking its reputation by making such statements, especially when Turkish economy is still at the early stage of recovery where it will face many adversities the actual recovery process begins.
The CBRT is rapidly losing public trust and confidence compared to the Naci Ağbal era. According to the Central Bank officials, the rate hikes represent their strong stance in maintaining a tight monetary policy, but the policy rate is still at least ten points below the expected inflation rate. Frankly, the CBRT can’t hide the fact that it is trying to stifle domestic demand through loans until the elections.
Obviously, the Central Bank fails to see or ignores the fact that the government keeps borrowing and printing money to finance the rising budget deficit is one of main causes of inflation and, and the fact that trying to stifle demand to stop price hikes will not fail to yield the desired results, but it will also eventually lead Turkey into stagflation.
But the CBRT also knows that the country’s GDP growth is at risk and exchange rates can skyrocket at any time. However, they think it is unlikely that both will happen at the same time. It is obvious that Turkey will run a current account deficit while economic growth slows down due to high energy prices. Therefore, the probability that interest rates, exchange rates and inflation rate will climb up together, creating a vicious circle, is overlooked.
Clearly, another main cause of inflation is the government that costs Turkish taxpayers billions of liras each day. With its official buildings, facilities, cars, employees, maintenance, security, travel, and despite all of that, with its disappointing inefficiency, the government generates too little benefit for too much money.
The duty of a government should be to reduce the production costs, but here in Turkey, more and more burden is put on the shoulders of the manufacturing industry. Nearly 9 million shipping containers enter and exit Turkey each year. An average of 550-600 euros is unfairly collected for each container as a customs duty. Authorities say that there is nothing they can do because private companies run the customs services, in response to grievances. If a government, which is supposed to prevent unfairness, is incapable of doing so despite its huge resources and organisation, then it creates inefficiency. It is obvious that the increases in production costs caused by nearly 5 billion euros per year unfairly imposed on shipping containers push the prices further up.
There are also bureaucrats who do not respond to correspondence. The government keeps expanding and expanding but the requests, complaints, wishes by citizens are not addressed properly, or overlooked or only addressed after it is too late. The reason for this is that the staff does not know how to answer the questions asked by the public. They cannot ask their superiors either probably because they afraid to do so. Sometimes, they deny an application or a request without even doing the proper research, hence, causing irreparable harm and loss.
Inefficiency is the most dangerous sickness in the world. However, as things are made to look like they are going well, people actually think they are.