Keeping up appearances

Keeping up appearances

Remember the British comedy series in the 1990s “Keeping Up Appearances?” Hyacinth Bucket, poor soul, so many liked to pronounce her surname as “Bouquet” when answering the phone. She used to say things like “Oh, it’s my sister Violet calling! She’s the one with the Mercedes, swimming pool, and room for a pony.” Keep pretending to be less miserable, and less poor than you really are, and maybe you will be. Right?

I thought of that feeling when I saw the headlines about the new eurobond issue of the Turkish Treasury the other day. It was on the front pages and all in Turkish, mind you, proclaiming that the Treasury successfully issued $2 billion worth of bonds. The issue was 300 percent oversubscribed, said the article. Yet the maturity decline from 10 to five years and the interest rate increase at about 48 percent wasn’t mentioned. It’s the new Turkey mood in international markets. Yet the headlines in Turkish papers still call it “the confidence bonds.” It’s just to keep up appearances with the Turkish audience.

It’s so much like the “total war against inflation” program that the government announced last week. Companies were asked to lower their prices by 10 percent for the coming two months. Why only two? Beats me. But the municipal police was dead serious about it, and we are now shown photos of policemen with serious faces inspecting prices of cheeses and canned goods. It’s the total fight against “capitalists raising prices to suck the blood out of the working people.” It reminds me of the Venezuelan central bank.

Why the act? It’s all there in the August balance of payments figures. Turkey had a current account deficit of $16.7 billion in the April-July 2018 period and attracted $4.3 billion in the same period. The situation reversed in April-August and the current account deficit declined to $14.1 billion, while fund inflows turned into an outflow of $10.1 billion.

So Turkey had a current account surplus in August, a current account surplus of $2.6 billion, but a fund outflow of $14.3 billion, mind you. This is a rather rare event for Turkey. The Turkish economy is rapidly rebalancing, i.e. contracting. Yet the financial account is also rapidly deteriorating. The contraction is too rapid, the deterioration too visible. Consumer inflation already hit 25 percent while that of producers’ is at 40-something percent.

While everybody is waiting for how fiscal contraction is going to be designed and public savings to be increased, the government has been focusing on keeping up appearances. Still, I have one piece of good news. That meeting where the government’s ministers solemnly swore a total war against inflation? The central bank governor was not there.

Central Bank figures indicate that no more energy should be spent just to keep up appearances. Let’s just face the reality: Turkey needs a detailed program, one that was promised so openly in the New Economic Program, and it needed it yesterday.

Inflation, analysis,