Community in dire straits

A crashing Turkish lira, political unrest in Turkey and a widening trade gap, have led to a double figure inflation growth for the second year in a row in the north, heavily impacting the Turkish Cypriot economy. The Euro-TRY exchange rate has plummeted in five years from 2.32 in 2013 to an all-time low on August 13 when it reached TRY 7.82 per euro, losing almost 40% of its value just in the current year.

As expected, the collapse of the Turkish Lira has had its toll on the Turkish Cypriot community as the inflation growth rate had reached a staggering 19.41% in June, compared to figures same time last year, as announced by the Turkish Cypriot planning bureau. While figures for the months that followed are not yet available, it is believed that due to the continuing fall of the TRY, inflation has broken every record.

Announcing the figures in July, Odul Muhtaroglu, the head of the public planning bureau had directly linked the increase in inflation to the crumbling Turkish Lira. As the TRY continued to fall over the following months, it is estimated that inflation has rocketed.

The situation in the import-dependent north is made even worse by the fact that the vast majority of imports are concluded in a foreign currency, mainly USD and EUR., widening the trade gap and weakening even further their purchasing power. The Turkish Cypriot community exported goods worth USD 105.6 mln while importing goods worth USD 1.6 bln.

The diminishing purchasing power was evident during the week that marked the celebration of one of the most important festive period. Normally, the Kurban Bayrami (the feast of sacrifice) would see Turkish Cypriots flooding the market, with shopkeepers expecting a serious income, but this year found them feeling disappointed by the turnout at stores. The daily Yeniduzen and Kibris newspapers reported comments from shopkeepers who said that the market was saved by Greek Cypriots and foreign tourists who flooded the market. The two papers had comments from shopkeepers in the traditional Bandabulya (Pandopoleio) market in north Nicosia.

Sener Elcil, the head of the Turkish Cypriot Teachers’ Union (KTOS) told the Financial Mirror that the community is in dire straits. He said that as everything is indexed to a foreign currency, Turkish Cypriots are paying a high price for almost every item in the market.

“If you go to buy a watermelon from the market, you will have to pay for the fluctuations of the Turkish Lira as they are mainly imported from Turkey”. Elcil added that this is just a small example of how the crashing lira is affecting their lives.

“Many services are also indexed to a foreign currency. Rents are also indexed to a foreign currency, while a number of private schools’ fees are in euros,” he explained.

On Friday, the union of the Turkish Cypriot secondary school teachers KTOEOS, called for authorities to fix the exchange rate between the TRY and the GBP, which is the currency most rents are denominated in.

Costs are also rising for the TC administration with authorities announcing a series of measures such as tax relaxation, VAT on property and rents to help lower income families. The ruling coalition has also decided on measures which aim to bring in cash such as the one-off tax on large