The daunting test ahead for minister Şimşek

A new era has begun for the Turkish economy. Minister Şimşek has taken on the role, having previously served in a completely different Türkiye. Now, he is faced with entirely different challenges and difficulties that must be overcome.

In fact, there was a consensus that he should become a minister. However, this consensus was formed from a narrow perspective. I see this as an injustice. The agreement surrounding Minister Şimşek's appointment was based on his ability to provide foreign exchange liquidity to Türkiye. However, while foreign exchange liquidity may be Türkiye's most immediate problem, it is not the only problem. Moreover, Minister Şimşek's capabilities go beyond simply increasing foreign exchange inflows. He possesses the ability to harmonize the existing state of the economy with its needs.

Narrowing the issue down to foreign exchange inflows not only fails to analyze Türkiye's problems comprehensively but also misinterprets Minister Şimşek's capabilities.

Before the challenging final quarter of the year, Minister Şimşek will have an opportunity to complete his preparations. He assumed office in a period where inflationary pressures won't be strong enough to tolerate upward fluctuations in exchange rates until September, and there will be ample foreign exchange liquidity. However, once the impact of the base effect diminishes, inflationary forces will come into play. This is why the preparation during the summer months is crucial.

However, this period also comes with a challenge that will make itself felt for nearly two years. I am referring to the ability to maintain strong wage increases. Strong wage increases will be necessary for households to manage certain difficulties such as renting, which will take time to solve. However, strong wage increases do not have a place in the policies expected from Minister Şimşek by the market. In fact, it would be contradictory. But it would be unfair to ignore some of the realities of the economy and expect Minister Şimşek to confine himself within a framework. A nuanced analysis will be required.

Previously, I considered that a sign of peace among economic actors could facilitate overcoming difficulties. In a way, Minister Şimşek can be seen as the embodiment of this sign of peace. His presence in the cabinet can carry as much weight as the policies he determines. If the parties involved in this peace are the state, businesses, financial institutions, and households, then peace will not be detrimental to any of the actors.

Thus, analyzing the market against businesses or prioritizing businesses over wage earners, or favoring the state over the market, does not bring about genuine peace. Therefore, economic management should be able to utilize the entire spectrum of policy options without being confined to a framework.

Meanwhile, discussions in the upcoming period will also revolve around the steps towards liralization (transition to the local currency). Particularly, the agenda will be occupied by Kur korumalı mevduat hesapları (KKM) or deposit accounts protected against exchange rate fluctuations. KKM was an excellent instrument if the foreign exchange reserves acquired through KKM were retained. If introduced at a different time and in a different context, it would not have faced criticism of "dollarization under the headline of liralization." If interest in KKM continues and this interest is converted into reserves, the final quarter of the year can be much smoother. In that case, KKM can partially or even completely liquidate itself, assuming such a plan is in place.

In fact, allowing the opening of foreign exchange accounts while KKM exists creates a dilemma. If the liberal stance regarding foreign exchange accounts continues in Türkiye, it can be considered that KKM will be phased out. However, having a stance on liralization and maintaining this stance is also a reality for today's Türkiye.

Certainly, liralization should not only be concentrated in the center of currency exchange but also firmly established in the center of savings preferences.

In conclusion, the economic management will face two important constraints in every equation formed in the upcoming period: strong wage increases and liralization. Once there is a visionary leader and a capable team, the desired results can be achieved. Of course, the ultimate goal is a transition from a complacent market to a free market.

These are the days when the foundation will be laid for the future, where owning a home, not the marketplace, will be the core aspect of the century.