Imports from Turkey ‘to be in Turkish lira’
President, Chamber of Commerce welcome move but others sceptical
GOODS imported from Turkey to the TRNC will be now be priced in Turkish lira rather than foreign currencies such as euros or dollars, according to an amendment to Turkish export rules.
The rule change was announced earlier this week and will come into effect on Monday, December 5, following years of lobbying from successive TRNC governments and business leaders.
The decision was hailed by the Turkish Cypriot Chamber of Commerce (KTTO), which said in a statement that the move will help tackle inflation, which is currently around 120 per cent in the TRNC compared to about 85 per cent in Turkey.
“It is expected that the provision, which is part of the action plan attached to the intergovernmental [Turkey-TRNC Economic and Financial Cooperation] agreement signed on June 3, 2021, and envisages the widespread use of TL for exports from Turkey to the TRNC, will be implemented and will enable the TRNC to meet its needs in TL and contribute to our fight against expensiveness”, the KTTO said.
“From food to appliances and automobiles to medicine, Turkey plays the most important role in meeting all the needs of the Turkish Cypriot people.
“Taking such a step and establishing trade relations on a TL basis will serve as a protective shield for both our people and our businesses against sudden currency fluctuations.
“The KTTO, which has constantly brought this [issue] up with its counterparts, is also honoured to see that the request for ‘trade between Turkey and the TRNC to be done in TL’ has been officially approved.
“Undoubtedly, the factor that will reduce expensiveness fundamentally is to establish efficient and innovative production processes, to make the goods and services we produce competitive and to be advantageous compared to their equivalents [from abroad].
“The fact that trade with Turkey will continue on a TL basis should also be considered as an important advantage in this process.”
The KTTO thanked the governments of both Turkey and the TRNC and said “we will continue to work together to increase the efficiency of trade relations between the two countries”.
President Ersin Tatar also welcomed the announcement, saying it will have a “positive effect” on the TRNC economy.
However some were sceptical that the switch to using Turkish lira to pay for imports from Turkey will help businesses and consumers.
Kudret Özersay, leader of the People’s Party, said that while the change in policy has “some positive aspects”, it is “not a solution to prevent price hikes and high prices in the market”.
He said that taxes, such as VAT, on goods for “basic needs” should be reduced to “zero” to make them more affordable to the public.
Arguing that some other politicians have been making “populist statements” regarding the use of TL for imports from Turkey, Dr Özersay said: “Nothing will change because the price of imported goods will be converted into TL at the [foreign currency] exchange rates on the day the invoice is issued.
“The payment will be in TL, so deferred payments on imports will most likely cease.”
Dr Özersay pointed out that the main raw materials of many products produced in Turkey and imported to the TRNC are procured by Turkey with foreign currency.
“Since the prices of sunflower oil, sugar, cocoa and similar raw materials are determined in foreign currency in the world market, even if these products are imported from Turkey to the TRNC by calculating [the price] in TL, it seems that high prices will continue due to the effect of foreign currency.”
Economist Göksel Saydam said that forcing Turkish exporters to accept Turkish lira payments from buyers in North Cyprus would “not do much” to reduce the cost of living and boost the economy.
He said that exporters in Turkey would most likely increase their prices to make up for any losses, noting that much of their own costs, such as for imported raw materials, are in foreign currencies.
Pointing out that exporters in Turkey who issue invoices in euros or dollars are paid according to the exchange rate on the day, Mr Saydam said: “If the exchange rate is 18TL on the day the invoice is written, the cost of the product will be written as 19TL and no-one will know this.”
According to official statistics from the TRNC Trade Office, Turkey accounted for almost two thirds of imports in 2021, worth nearly $1 billion.
The TRNC’s second biggest source of imports last year was the EU (15 per cent), followed by the Far East (9 per cent), Islamic countries (6 per cent), and “other European countries” (4 per cent).