Once upon a time, as many might remember, the Turkish Lira used to have too many zeros in its money notes that a million note could buy you no more than a loaf or two of bread. Whether the latter was a rumor or not, there was no doubt back then that inflation has reached insane limits and that the purchasing power of Turkish citizens has diminished significantly. As a result, and in its efforts to reconcile the deteriorating situation; the Turkish government decided to drop six zeros from its currency. Whether the purpose was to retain the lost currency sovereignty or to facilitate the process of joining the EU, Turkey’s decision was quite brave in that context.
With such a change; many changes were made to the monetary policies set and regulated in the country. One of the main changes was the decrease in money supply as the new Lira held a new increased value which increased the purchasing power of Turkey citizens. Moreover, interest rates had to now be reset to lower levels as inflation was artificially decreased, even though the effects of such a decrease are only temporary. Besides that, new conversion rates had to be set once agreed upon to ensure that international trade is not disrupted. This would also include the tourism sector which Turkey has been promoting aggressively through its national carrier, Turkish Airlines.
Now even though Turkey has invested lots of effort to fix its monetary system, something went wrong along the way towards achieving its goals. As I currently reside in Istanbul to work for a month, I noticed that people have more faith in Euro than Turkish Lira just like we, in the UAE, trust the US Dollar more than the local Dirham. Being the Uncle Sam that we all look up to and that the two currencies are pegged; it makes partial sense. Based on that, I can perhaps make sense of the trust in Euro by Turks as a failed attempt to join the EU. However, in a non-English speaking country like Turkey that is not located anywhere near Mexico; I cannot relate to why they would reevaluate their Lira if they would only accept US Dollar for my visa!
In contrast, Turkey has transformed completely from times when you might actually have to take a truck load of cash to buy a house. And it has definitely saved itself from a Barter economy that existed in Germany a few decades ago, and another that exists now in Zimbabwe. But when compared to Czech Republic and Hungary, who are already in the EU, most transactions are conducted in their local currencies when Turkey relies on all but its local currency. So the question here is: why is the Lira now left to fluctuate towards a new devaluation bottom if it was already troublesome to reevaluate it? In other words, what’s the point of having a reevaluated currency if it’s “lost in translation” between the Euro and the US dollar?