Turkey: Government Faces Pressure to Devaluate

Coskun pointed out that government has decided to put the economic reform program into practice and stated that they are not going to interfere with the Central Bank’s independence and added, "Turkey has no conditions that makes devaluation necessary."

Coskun, who spoke at the 9th annual Stock-Exchange Council meeting in Istanbul, said that the economy will "find its own equilibrium."

"In one or two months time the exchange rate will stabilise. We need some patience and some courage."

Departments Union Administration Council President Rifat Hisarciklioglu said that the positive numbers of exports are showing that the economy is pulling itself together faster than he expected. Hisarciklioglu said that today is different than yesterday and continued: "Different from the previous years, growth is in the hands of private sector for the first time in history. Second, of all our country has been continuing to grow for the past one and a half years without short-term foreign capital, also called ‘hot money’. In the past, ‘hot money’ played an important part and was insisted upon for economical growth. We saw the results in 2001. Third, in the past two years, Turkey has completed all the reforms that were neglected. This isn’t the old Turkey anymore."

Hisarciklioglu, who stated that imports are also increasing as much as exports, said, "At the end of June, we saw that exports decreased to 70.8% when compared to imports. When this goes lower than a specific amount, it is believed that this is a sign of a crisis in public opinion."

Hisarciklioglu does not agree with this because of two reasons: "First of all, when the years without a crisis are examined, in response to the augmentation of imports there are pauses in exports. Export/import ratio was 62% in the past 10 years and 64% in 20 years. This number, by itself, should not be seen as a primary indicator. What is more important is that right now there is a free rate of exchange. It is true that this exchange rate system is saddling exporters with high costs. But the biggest advantage of this system is the elasticity it provides in exchange rate levels, and this will prevent a crisis from forming on large scale. It is no longer acceptable to use the numbers of previous years as references when exchange rates were under the control of the state. The year 2001 was a watershed for Turkey and there is no turning back."

Ibrahim Turkmen / Istanbul / TURKEY