What Happens If We Throw Another “Zero” From The Turkish Lira Right Now?

Solutions about how the economy can recover are confusing us as citizens. As you know, the 6 zeros removed from the Turkish lira in 2005 reminded us that while we were recovering our economy at that time. had been supportive.

According to TUIK data, the year 2023 CPI rate as 38.21% announced. In order to reduce these rates to single digits, the question that came to our mind was: What would happen if we removed zero from the Turkish lira with a practice similar to that in 2005? But this time not 6, but 1… To understand this, let’s first remember what happens when 6 zeros are thrown in the recent past.

What was the reason for removing 6 zeros from the Turkish lira?

Back in 2005, before our money was running low, we were using the largest denomination banknote in the world, numerically. (20,000,000 TL). Although we are used to buying bread for “5 million”, this situation -especially in the foreign market- affect the reputation of our money and it caused confusion. Because while everyone is talking about hundreds and thousands; we were talking much larger numbers. (Like millions, billions, trillions.)

in 2004 Some of the largest banknotes in the world were as follows:

In all transactions in hopes of simplicity and reducing inflation to single digits In 2005, 6 zeros were removed from the Turkish lira. However, you can guess that it is not easy to make such a big change in a country’s currency. So before these zeros are discarded, a series of preparations The economy was prepared for this change.

Turkey was already recovering its economy before and after 6 zeros were dropped from the lira.

One of the biggest factors of this situation is that we are included in the “stand by” program of the IMF and that we have approximately 45 billion dollars We used funds. With the acceleration of the European Union negotiations and the support of the IMF more foreign currency entered the country.

Again, structural changes were made in that period; some banks were transferred to the SDIF and the capitals were strengthened. Government expenditures have been reduced. budget deficits to be brought under control had begun.

With the increasing foreign exchange inflow, the 6 zeros that were removed from the lira contributed positively to the course of the economy, although it confused the public. However, there is an important point here: Our economy has already started to recover. and hence throwing 6 zeros is also just this case only. supported and simplified our currency and boosted its reputation. So how are we now?

If we try to drop 1 zero, can we see a similar effect?

The increase in the dollar and euro has been going on for a while. Therefore “If we drop 1 zero from TL, can we catch up with the exchange rates?” we thought, and of course we weren’t the first to think about it. You may even have thought of it and said, “I thought of it too” even when clicking on this article. One of the most satisfying answers to this question that we can all think of came from Economist Mahfi Eğilmez.

Economist Mahfi Eğilmez explained in his article that removing a zero from TL will not have much impact on the market, because structural reforms must be made first of all. At the same time, given the current increase in our country’s budget deficit, Getting a zero out of TL it will only cause confusion and explains it in an appropriate way. So first we need to sum up our internal economy to drop 0 from the currency. So what’s the solution for this?

For example, can the $51 billion agreement we made with the United Arab Emirates a while ago have a similar effect with the capital provided by the IMF in 2005?

Economist Ali Ağaoğlu has an interesting answer to this issue. In his statement on the subject, he will come from the United Arab Emirates. “10 billion of 50 billion dollars will be lost on the way” says. However, if the same amount was to come from the IMF, this money would be market impact of almost 500 billion dollars He also underlines that he expects it to happen.

This is because one is given with strict rules and structural control requirements and thus has a huge impact on the recovery of the economy; one of the other in exchange for goods or services to be.

So what has changed that our economy, where we were able to throw 6 zeros in 2005, does not even allow us to throw 1 zero now?

When we look back, one of the biggest factors contributing to our economy in 2005 was the IMF. Our commitment to the “stand by” program and therefore the increase in our foreign exchange inflow and the fact that our budget deficit was somewhat under control.

However, our current budget deficit is quite large. As Mahfi Eğilmez shared in his article; The estimated 1.7 trillion lira expense last year, at the end of the year With the additional budget law, it was 2.8 trillion liras. Moreover, these are based in Kahramanmaraş and Hatay, where we lived at the beginning of 2023. it was before the earthquakes. Therefore, we will see the effect of earthquakes on our budget deficit this year.

To summarize; the money from the gulf will save our economy and Let’s get to the level of “Let’s get zero from TL” will not provide. Moreover, experts say that in order to remove 1 zero from TL, we must first collect our economy, but they do not expect our economy to be saved by the money coming from the gulf.

If such a step is taken now Couldn’t stop saying “million, billion” We couldn’t explain this situation to our grandmothers and grandfathers anyway. Anyway…

In countries such as Zimbabwe, shopping with trillion-dollar bills continues:

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