Delivering a speech to a large audience at an iftar (fast-breaking dinner) organized by the Aegean Region Chamber of Industry (EBSO) in the western province of İzmir on Thursday, Babacan endorsed Turkey's monetary policy against exporters' complaints that the highly valued lira is putting their business volume in jeopardy, thus hampering the country's economic growth. He noted that Turkey learned very well through its experiences in the early 2000s the economic turmoil caused by a fixed exchange regime.
“Still demanding a guarantee for the exchange rate is not realistic in a country that lived through the 2001 crisis and means that mistakes made back then have quickly been forgotten,” Babacan said, lending support to the Central Bank of Turkey by adding: “The central bank is the central bank of the Republic of Turkey, not of any other country. … Its priority is ensuring stability. Believe me, if we risk stability and opt for a certain exchange rate, we will all see losses.”
He, however, argued that the central bank's foreign reserves are too low given Turkey's annual foreign payments. “It is a reality that our central bank's [foreign] reserves are small. Turkey has a current account deficit now. If we look at the foreign payments in the year ahead of us, this number is around $100 billion. A figure of $75 billion in the central bank reserve is small for a country that has an annual foreign payment of $100 billion,” Babacan said.
Exporters demand the central bank increase the amount of US dollars it buys from markets to decrease the value of the lira. Babacan said that the central bank buys $60-70 million every day to increase its foreign currency reserves, but those defending more central bank acquisitions do not take into account the side effects the Turkish lira being released into the market will create in return. “Who is going to control where this money will go? What kind of side effects will excess liquidity create in the markets? This should be calculated,” he said.
