Turkish Cypriot Community : Coping with the Turkish Lira Depreciation Shock
The Turkish lira (TL) has depreciated to an extent not seen since the 2001 crisis, reaching its lowest level in September 2018 (TL 6.37/US 1.00 dollar), losing 66 percent of its value against the US dollar since January 2018. This Regular Economic...
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| Language: | English |
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World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/637121600844818359/Turkish-Cypriot-Community-Coping-with-the-Turkish-Lira-Depreciation-Shock-A-Macroeconomic-Monitoring-Note http://hdl.handle.net/10986/34531 |
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okr-10986-345312021-05-25T09:49:33Z Turkish Cypriot Community : Coping with the Turkish Lira Depreciation Shock World Bank ECONOMIC GROWTH ECONOMIC OUTLOOK INFLATION EXTERNAL DEMAND CURRENT ACCOUNT FISCAL TRENDS BANKING SECTOR RISKS LOCAL GOVERNANCE MUNICIPAL FINANCE PUBLIC FINANCIAL MANAGEMENT TAX ADMINISTRATION The Turkish lira (TL) has depreciated to an extent not seen since the 2001 crisis, reaching its lowest level in September 2018 (TL 6.37/US 1.00 dollar), losing 66 percent of its value against the US dollar since January 2018. This Regular Economic Report focuses on the likely impact of the depreciation on the Turkish Cypriot (TC) economy. Although the magnitude of the 2001 depreciation eventually turned out to be double the current depreciation, the reaction of the economy in 2001 offers useful insights into understanding the situation today. The report also discusses the financial situation of Local Communities Bodies (LCBs), whose budgets are highly dependent on transfers from the central administration. With the TL depreciation, fiscal pressures will arise at the central level, as with the local level, where the quality of service delivery is likely to be eroded as a result. To encourage spending reductions, the central administration could toughen its approach and reject budgets based on implausible revenue projections. It could encourage wage bill reductions by enforcing current limits on staffing and overall wage spending. It could also assist LCBs to improve the efficiency of services, such as water supply and solid waste management, by encouraging joint service arrangements among small LCBs. But much of the power to improve the situation lies with the LCBs themselves, as they have a considerable degree of fiscal autonomy despite the limits imposed by central regulations. They can increase basic tax rates up to the rate of inflation and impose higher valuations; and are also free to increase water tariffs (subject only to pro forma review) and the rate of various service charges within a range set by central regulation. Although their ability to reduce the number of civil servants is limited, they have considerable control over the numbers and wages of contracted staff and front-line service providers. The first section of this report discusses recent economic developments in the TCc with a focus on the likely economic impact of the TL depreciation. The second section assesses the state of the LCBs’. 2020-09-29T14:43:11Z 2020-09-29T14:43:11Z 2018-11 Report http://documents.worldbank.org/curated/en/637121600844818359/Turkish-Cypriot-Community-Coping-with-the-Turkish-Lira-Depreciation-Shock-A-Macroeconomic-Monitoring-Note http://hdl.handle.net/10986/34531 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work Economic & Sector Work :: Economic Updates and Modeling Europe and Central Asia Cyprus |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ECONOMIC GROWTH ECONOMIC OUTLOOK INFLATION EXTERNAL DEMAND CURRENT ACCOUNT FISCAL TRENDS BANKING SECTOR RISKS LOCAL GOVERNANCE MUNICIPAL FINANCE PUBLIC FINANCIAL MANAGEMENT TAX ADMINISTRATION |
| spellingShingle |
ECONOMIC GROWTH ECONOMIC OUTLOOK INFLATION EXTERNAL DEMAND CURRENT ACCOUNT FISCAL TRENDS BANKING SECTOR RISKS LOCAL GOVERNANCE MUNICIPAL FINANCE PUBLIC FINANCIAL MANAGEMENT TAX ADMINISTRATION World Bank Turkish Cypriot Community : Coping with the Turkish Lira Depreciation Shock |
| geographic_facet |
Europe and Central Asia Cyprus |
| description |
The Turkish lira (TL) has depreciated to
an extent not seen since the 2001 crisis, reaching its
lowest level in September 2018 (TL 6.37/US 1.00 dollar),
losing 66 percent of its value against the US dollar since
January 2018. This Regular Economic Report focuses on the
likely impact of the depreciation on the Turkish Cypriot
(TC) economy. Although the magnitude of the 2001
depreciation eventually turned out to be double the current
depreciation, the reaction of the economy in 2001 offers
useful insights into understanding the situation today. The
report also discusses the financial situation of Local
Communities Bodies (LCBs), whose budgets are highly
dependent on transfers from the central administration. With
the TL depreciation, fiscal pressures will arise at the
central level, as with the local level, where the quality of
service delivery is likely to be eroded as a result. To
encourage spending reductions, the central administration
could toughen its approach and reject budgets based on
implausible revenue projections. It could encourage wage
bill reductions by enforcing current limits on staffing and
overall wage spending. It could also assist LCBs to improve
the efficiency of services, such as water supply and solid
waste management, by encouraging joint service arrangements
among small LCBs. But much of the power to improve the
situation lies with the LCBs themselves, as they have a
considerable degree of fiscal autonomy despite the limits
imposed by central regulations. They can increase basic tax
rates up to the rate of inflation and impose higher
valuations; and are also free to increase water tariffs
(subject only to pro forma review) and the rate of various
service charges within a range set by central regulation.
Although their ability to reduce the number of civil
servants is limited, they have considerable control over the
numbers and wages of contracted staff and front-line service
providers. The first section of this report discusses recent
economic developments in the TCc with a focus on the likely
economic impact of the TL depreciation. The second section
assesses the state of the LCBs’. |
| format |
Report |
| author |
World Bank |
| author_facet |
World Bank |
| author_sort |
World Bank |
| title |
Turkish Cypriot Community : Coping with the Turkish Lira Depreciation Shock |
| title_short |
Turkish Cypriot Community : Coping with the Turkish Lira Depreciation Shock |
| title_full |
Turkish Cypriot Community : Coping with the Turkish Lira Depreciation Shock |
| title_fullStr |
Turkish Cypriot Community : Coping with the Turkish Lira Depreciation Shock |
| title_full_unstemmed |
Turkish Cypriot Community : Coping with the Turkish Lira Depreciation Shock |
| title_sort |
turkish cypriot community : coping with the turkish lira depreciation shock |
| publisher |
World Bank, Washington, DC |
| publishDate |
2020 |
| url |
http://documents.worldbank.org/curated/en/637121600844818359/Turkish-Cypriot-Community-Coping-with-the-Turkish-Lira-Depreciation-Shock-A-Macroeconomic-Monitoring-Note http://hdl.handle.net/10986/34531 |
| _version_ |
1764481083607351296 |