BY ALAATTIN AKTAS
The country is at the end of its rope in terms of using foreign exchange reserves. It has opened a new era in economics with its monetary policy decisions. We’ve been on that road for a while…
We have been trying to keep the exchange rate at certain levels by selling reserves that we do not have. But it is not working! We can no longer keep the exchange rate at the desired level by selling foreign currency that does not belong to us, nor is there any foreign currency left that we can sell in this way. It is over. The negative reserve is growing day by day.
We will have to stop at some point.
At that stage, what will be done, and what kind of decisions will become inevitable?
Although we know that we are at a dead-end, we are also aware that we still have some distance to go. That is why we are trying to use that distance, that is, time, well. The time, that is, until the election…
There seem to be two options:
– No matter what the cost, if an external source can be found that will give us a breather, the exchange rate will be prevented from increasing too much. And even if some decrease in exchange rates can be achieved, the country will be able to manage until the election. Of course, this would be the preferred option.
– If no external source can be found and residents start to turn to foreign currency again (as a matter of fact, there are signs of this), in this case, the path ahead will be shortened, that is, the election will be pushed forward because the economic picture of the next year will be worse than today with the increasing negativity day by day.
Is there a third option? Maybe…
When we run out of sources used for foreign exchange rate-protected deposits, there will be not much left to do to reduce the USD rate, which will see TRY 18 or higher levels. As the exchange rate at this level will cause the situation to worsen, especially in terms of inflation, either a new invention will be made or the unpleasant concept of foreign exchange control, albeit limited, will come to the fore. Thus, foreign currency account holders will get butterflies in their stomachs.
In other words, the savers will be told that they can withdraw limited money from their accounts or, as a last resort, “I have converted your currency into TL!”
However, this would be financial suicide for Turkey, and in our opinion, such a mistake will not be made. It should not be made!
If you say “I have put a restriction on the foreign currency accounts in the bank” today, you are implicitly saying to citizens that you were defeated in the fight against foreign currency. Thus, everyone will rush to buy foreign currency. Then, it will be necessary to increase the limit of the control on foreign exchange. Such a step would cut Turkey off from the rest of the world.
In addition, the citizens will think that the government may seize their TL savings as well. This time the banks will not be able to cope with the withdrawals of TL deposits.
It is not nice to even talk about limiting the withdrawal of foreign currency from the bank or confiscating this money completely. But lately, so many mistakes have been made that such scenarios find more and more place in the minds of citizens.