INTERVIEW WITH THE NEW YORK TIMES BY THE ISSUE DEPARTMENT OF THE CENTRAL BANK OF TURKEY ON NEW TURKISH LIRA MADE ON 28 DECEMBER 2004
1) How much old currency is currently in circulation?
Currently, the total value of banknotes in circulation is approximately 13.5 quadrillion Turkish Lira and the number of banknotes is about 1.3 billion pieces.
In terms of value, the share of the highest denomination, 20.000.000, constitutes more than 83 % of the circulation.
This is one of the reasons we re-arranged the composition and issue two new high denominations, 50 and 100 YTL.
2) How much of the new currency (in terms of value and weight, if possible) will be available as of Jan. 1?
The value of YTL notes that is available today is more than the value of TL banknotes in circulation.
In numbers, the amount of YTL notes that will be printed by the end of this year is 15 billion YTL in value (15 quadrillion TL) and 587 million in pieces.
In terms of weight, it makes approximately 763 tones.
As of January 15, it is planned to 16 billion YTL in value and 627 million in pieces.
3) Based on your own experience when banknotes have changed and possibly, the experience of Europe’s introduction of the Euro, what are your predictions for the first or two weeks of the New Year? Do you expect most of the exchange to take place early?
As you know, in Euro zone, for the notes and coins co-circulation period was just 2 months at most. So, what happened in Europe is actually happened almost in one or two weeks.
In our case, co-circulation period is one year. In the public information campaign, we emphasize the fact that both currency, TL and YTL, will be used for one year.
In this regard, there is actually no need for the citizens to go to the banks just for the exchange of the notes and coins.
However, considering the fact that public might be curios about the notes and would like to get it even at the 12 a.m. on December 31, we made front-loading and sub-frontloading agreements with the banks and private financial institutions.
So these institutions will make their payments by YTL in the early morning of January 1, 2 and 3.
Also, our branches will be open on the first and second day of January to satisfy market’s demand for the exchange.
Generally speaking, we expect that in our natural workflow, almost 90-95 percent of the notes in terms of value will be replaced by the end of February.
One more important point is that on 20th January, we have a religious holiday and this is the time that currency in circulation normally increases around 35 % before the holiday and these banknotes come back again after a week.
That means, together with the salary payments in the mid of January, we have an advantage to replace around 40 % of the notes during this period.
By the way, this may look a little bit challenging but we took all the necessary measures for a smooth transition.
4) Such a change means updating and revising such things as automatic teller machines at banks, computer programs, accounting programs, cash registers and tax bills. What else? Is the government ready in terms of its computers and ministries? Are banks ready? Is the small shop owner ready?
Right. ATMs, computer programs, accounting programs, cash registers and tax bills need to be adapted to a new currency. What else? Electronic fond transfer and security transfer systems, banknote processing machines, desktop counting-authentication equipments, statistical data bases, check clearing system...all these machines and systems need to be revised accordingly.
At this moment, we can say that the adaptation works are almost completed and necessary tests were performed during November and December.
To ensure timely completion of the preparations and to coordinate the operation, YTL Steering Committee was established immediately after the Law was ratified by the Parliament in January. This Committee was formed under the management of the Central Bank by the Ministry of Finance, Ministry of Industry and Trade, Undersecreteriat of Treasury, Prime Ministry State Institute of Statistics, Banking Regulation and Supervision Agency and Capital Markets Board.
The
committee decided to set up
3 sub-committees to make necessary arrangements
effectively.
1. Accounting 2. IT 3. Companies
The IT works are organized under the head of the Central Bank and we do not expect a serious problem in this field.
Thanks to a very comprehensive information campaign and YTL steering Committee, we can say that
- All the necessary regulations are published by the authorities,
- All the citizens and the companies are informed on these changes on time,
- And technical preparations are completed accordingly.
What was done in Euro zone in 3 years is performed in Turkey actually less than one year. And, we should not forget the fact that we have not been using a sub-unit Kurus, in our currency since 1989. That’s why the scope of operation is actually beyond the exchange of the notes and coins. We believe that time will show us how great job each institution has performed in this operation.
5) Is the average Turk psychologically ready to see the old banknotes and to give up being a billionaire?
We can sat that actually public is already dropped zeros in their daily transactions. I mean we already learned that.
Indeed, multiple zeros on the left side are not a problem but when they come to the right side, then it creates many problems especially in cash operations, accounting systems and IT programs.
So, in that sense, YTL operation is a technical necessity.
With regard to public response, we have made 2 public surveys in 12 cities in August and at the end of October.
The results indicate that more than 93 percent of the population is aware of the operation and around 70 percent of these people believe that they will adapt themselves to new currency in a very short time.
So, we feel a great public support for the operation and together with a very close cooperation, it strengths our expectation for a smooth transition. Millions of billionaires make it nonsense to be a billionaire.
6) Will you have a hotline available for questions, problems and other issues during the changeover?
As you know, in the information campaign, it is very important to provide correct information on time and give the same messages to the public.
To be able to do this, of course we need to have a good cooperation among the institutions and a centralized model for communication.
So, as a first step, a common web site, www.ytl.gen.tr, was assigned by the members of the YTL Steering Committee to inform the public on the regulations, announcements and even, as a part of our transparent policy, on the meeting records.
There is a contact person from each institution and ones we get the question we immediately forward it to each relevant institution and person.
During the preparation period, also at our Bank’s web site a special link, yenilira@tcmb.gov.tr, was assigned to get the questions. We will continue to give this service until the changeover is completed.
Additionally, on December 31, a Supervision Committee will be ready at night to follow the banks’ transition. Each bank will transfer the information through a special web link on real time basis to the committee and any problem that may rise in the transition will be handled by this Committee.
So, it is like Y2K operation but this time it is actually more than that…
7) How will you manage the security challenges posed by the need to deliver such enormous amounts of banknotes and to pick up such big volumes? Will the army be used to secure trucks?
Such enormous amount of banknotes is transferred by the armored vehicles escorted by the Bank’s security officers, by the police and the army.
There is strong cooperation in this triangle and thanks to that cooperation, neither in this operation nor in our history, we did not have any attack to our vehicles.
8) Some analysts in Europe say that the switch to the Euro led to as much as a 30 percent rise in prices, due to rounding up of prices and other factors. What do you expect to happen here? Is there a way to prevent such inflation?
As you know, in euro zone, using 12 different exchange rates and increase in prices of mostly consumed commodities and services made rounding more remarkable.
Nevertheless, Euro area inflation rate in 2002 was 2.2 % and this was less than the figure in 2001, which was 2.5 %.
According to Eurostat, the EU’s statistical agency, the effect of Euro changeover on prices in the first six months of 2002, ranged from 0 % to 0.16 % among the member countries and did not exceed 0.2 %.
On the other hand, inflation is a fact reflecting continuity in price level increases.
And in Turkey, so far, rounding showed a continuous process in the inflationary environment and with the loss of coin usage.
In this operation, together with consistent decrease in inflation, we are not expecting a serious rounding problem.
As you know, retail sector already started to show both TL and YTL prices on the lists and tags. Thanks to competitive market conditions, the prices are pulled down rather that pulled up in some retail markets.
Furthermore, removing zeros is not expected to have a positive or negative impact on exchange rates or interest rates other than effecting expectations positively.
9) What other designs were considered for the banknotes? How were these designs selected?
As it needs a plenty of time, the works on designs started a couple of years ago, sometime in 2000.
For easier recognition of banknotes and to prevent confusion in transition to YTL, denominations with the same purchasing power are produced in the same colors and designs as those of the current TL notes.
In the designs, we generally use natural, historical and cultural places of the country. If you look at the views, you can see pictures from western Turkey in 20, middle of the country in 50 and Eastern Part in 100 picturing the integrity of the country.
We applied the same policy of using contrast colors for successive denominations.
And, we have size differentiation for 1, 50 and 100 YTL against counterfeiting and for visually impaired people.
10) Have there been problems with counterfeiting of lira?
So far, we have not been observing a serious counterfeit treat to Turkish Lira. It is mainly because of the value of TL denominations.
But from now on, since we are going to use high value denominations, we need to be much more careful against counterfeits.
For this reason, in our information campaign, as a central Bank, we give priority to inform the public on the main 6 security features and additional 5 for the professionals.
Actually, counterfeiting is an international issue and needs to be handled in international level. We are a part of this international works and always at least 2 steps before the counterfeiters.
11) How will the change affect the economy in the short term? Do you think this will make the lira more widely convertible?
As you know the currency reform has been on the agenda but could not be applied so far due to high inflation.
The reform and the economic stability program are very important for the confidence and expectations.
We can say that this operation is an indicator of the success in lowering inflation and determination to keep inflation in single-digit units.
We believe that a single-digit inflation accompanied by zero-dropping operation will improve credibility of the national currency. But of course, just like the case in other countries, the success of the reform depends on the success of the stability program.
12) What will you do with the old banknotes? How much paper, in terms of weight and volume, is presented by the old banknotes?
Currently, we burn or bury the unfit notes just as most of the central banks do.
The expected weight of TL notes withdrawn from circulation is approximately 1.600 tones and this quantity makes up 1.850 cubic meters.
To use effectively this huge amount of TL notes, the meetings were held with Turkish Scientific and Technical Research Association and that institution is studying on several options.