Central Bank ‘focusing on permanent long-term solutions’
Türkiye recently started to implement the new Turkish economic model that prioritizes sustainable growth by achieving permanent price stability through investment, employment, production and exports, Kavcıoğlu said in an article titled “Liraization Strategy” on the bank’s blog on Sept. 12.
“The liraization strategy implemented by the bank is one of the key elements of this model,” he said.
With this, he said, the bank has been focusing on permanent reforms that will ensure sustainable price stability within the framework of free market dynamics.
“While designing its monetary policy decisions, the bank is confronted with the Turkish economy’s structural problems, particularly regarding a sustainable external balance,” Kavcıoğlu wrote.
“In this process, instead of easy but temporary solutions, it focuses on permanent long-term solutions despite the difficulties in the short and medium term. This process is also a challenge to a structural problem that has remained unresolved despite many years of efforts.”
Eliminating dollarization, “the partial dependence of the country’s economy and the main transmission of its financial system on foreign currency,” structurally and permanently has been defined as the main objective of the liraization strategy of both the Central Bank and all stakeholder institutions,” he said.
With the liraization strategy, the bank is building the monetary policy pillars of the Turkish economic model and focusing on permanent reforms that will ensure sustainable price stability within the framework of free market dynamics, the governor added.
“In line with the strategic global value of our country and matching the value added that our citizens have created with their unequalled human capital, we are determined to use our liraization strategy to ensure that the interest in the Turkish lira in the economy increases consistently, our national currency becomes the main payment instrument and store of value in our economy, financial resources are efficiently and evenly distributed for investment, employment, production and exports purposes, thereby establishing a permanent current account balance, and our financial architecture is designed in a way that will increase the effectiveness of monetary policy,” Kavcıoğlu said.
The bank’s key priority via the liraization strategy is to resolve the problem of high currency substitution, “which has been a structural problem in the fight against inflation for many years, as well as to achieve the sustainability of a permanent external balance,” he added.
“Also supported by macro- and microprudential measures, the sustainability of external balance will now accompany the strong balance in public finance and thus, the objective of achieving and maintaining price stability will be fulfilled.”