ECONOMY

Turkey readies campaign to introduce new lira currency

ANKARA – Turkey will launch a national campaign to introduce the New Turkish Lira, which is to enter circulation on January 1 and will resemble the old currency, minus six zeroes, Prime Minister Recep Tayyip Erdogan said yesterday. «We will launch a promotion campaign across the country in the coming days,» Erdogan told a press conference, flanked by Economy Minister Ali Babacan and Central Bank Governor Sureyya Serdengecti. «We have three-and-a-half months for the campaign,» Erdogan said. «Any questions that might arise in this period will be answered by the competent bodies and no questions will be left unanswered,» he said, adding that the promotion would continue after the new banknotes hit the streets. Chronic inflation and financial crises over several decades hyperinflated the Turkish lira to the point that the smallest coin today is worth 25,000 lira (0.01 dollar), while the biggest banknote is 20 million lira (about $13). Last year, the government announced plans to chop off zeros from the embattled currency as it made headway with an IMF-backed austerity program to bring the country out of its worst recession since World War II. For many Turks, the multi-zero currency is a stain on national pride, symbolizing economic failure. But a recent opinion poll shows many Turks are worried the currency reform will be inflationary – increasing prices the way the euro did in some EU countries when it was first introduced. Erdogan brushed aside the fears, however, arguing that the move will only strengthen Turkey’s drive to overhaul its economy. «The (currency) reform is a concrete indication of our determination to bring down inflation and ensure economic stability,» the prime minister said. «We will never take a step that will contribute to inflation.» Officials are keeping the New Turkish Lira under wraps for security reasons and will unveil it to the public next month, but the central bank and the national mint have already begun printing and distributing banknotes and coins. «With this reform, which is a first – a revolution in Turkish history – daily life and economic activities will become much easier. Furthermore, the Turkish lira will regain its prestige in the international arena,» Erdogan predicted. «Turks will once again be proud to carry the lira in their pockets and will not be ashamed to show their currency abroad,» he said. After the reform, one New Turkish Lira will be equal to 1 million Turkish lira – and, at current rates, the new currency will be worth 65 US cents or 55 euro cents. Both currencies will circulate during a transitional period until December 31, 2005, during which time labels will list prices in each. The reform will also reintroduce the kurus, which disappeared from circulation more than two decades ago. One new Turkish lira will be equal to 100 kurus. The country’s economy began its downward slide after a massive devaluation against the dollar in 1970. Turkey has been battling to rebuild its economy since 2001, when a banking crisis caused havoc in the economy, sent financial markets into turmoil and slashed half of the lira’s value against the dollar. The country has since achieved considerable progress with a tight economic program, backed by a 16-billion-dollar loan from the International Monetary Fund, which brought down chronic inflation and spurred economic growth. But some analysts fear that the tide could turn again if the government eases on spending. An IMF delegation began talks in Turkey yesterday for a new credit to Ankara after the current standby deal ends in February 2005.