What Had I Written Last Year Today?
Below is the article I had written on the 19th of December last year in exactly the same words used originally.
“Foreign exchange reserve movements show us that the CBRT is still selling foreign currency to the market in order to raise the FX rates to a certain level.. On the other hand, there is a significant decrease in foreign currency deposit accounts.. The figures cannot fully confirm that individuals and businesses have sold their foreign currency and returned to the Turkish lira.
… Compelling provisions are being implemented by the regulatory authorities for banks to increase their deposit rates in Turkish Lira and reduce their foreign currency assets. Therefore, I guess that the amounts withdrawn from the foreign currency deposit accounts are not only converted into Turkish lira, but some of them are kept as cash for precautionary purposes.
“It takes more than a few buckets of water to turn the water wheel…”
So far, the government has been handling the situation with the help of the foreign currency brought by the exporters and the temporary funds provided from some countries. When we analyse the reasons why the exchange rates did not rise or fall despite all these risks, we find the following answers:
– New regulations about the foreign currency generated through exports
– New regulations imposed on banks
– Restrictions on cash loans
– Tracking foreign currency buyers on the Finance System and if necessary deterring them from buying foreign currency
– Interfering in sales where necessary
– Interfering in TRY transactions abroad
The government doesn’t change its ways since apparently it thinks that its interference is yielding positive results. Meanwhile, the cost of government borrowing in foreign currency has exceeded that of TRY borrowing. Even this problem alone shows that the implemented policies do not find any response in the international markets, which means this monetary policy only works within Turkey. We fail to impose our dynamics on foreign markets when borrowing from them.
I hope, when inflation starts to fall, it will meet market rates at some level, and as economists, we will stop looking for logical arguments to try to defend this policy that no one fully understands, by. I just wish that both inflation rate and interest rate will not surpass 45%.”
Well, it appears like very little has changed since I wrote that article. Some harsh rules have been thrown away, but the conditions remain the same while some parameters have worsened. The previous methods to improve the economy were not the right ones and I am not certain whether the ones in place at the moment are correct either.
