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16 Year Adventure of the Exchange Rate!

Either in ‘apprenticeship’ or in ‘mastership’, in which period has the exchange rate gone up?

Hüseyin Özay

In Turkey when someone speaks of economic crisis, the record high increases of exchange rate of dollar come to mind. Those who are in their twenties will probably not remember that all of the past economic crises arose out of the record high increases in the exchange rates. Therefore, the citizens figure out the impending crisis from the ‘exchange rate of dollar’.

Today, once more, the exchange rates have reached record high levels and the exchange rate of dollar has approached the psychological limit of 5 TL. During the 16 year JDP reign, the economy grew over and over in record high levels. No banks bankrupted and no remarkable crisis experienced. Alright then, what has made dollar rise up to 5 TL? From which level and how has the exchange rate of dollar come to this end during the 16 year JDP reign? Here is the answer…


In the early 2000s, Turkey got acquainted with ‘the bankrupted bank’ operations. As today’s operations against the Fethullahist Terrorist Organization (FETO) and other ones, the operations against bankrupted banks were in agenda and prominent. Turkey used to start the day with news such as ‘Bank A has been confiscated’. There at that point, at the end of that process, during Turkey was carrying out the agreement with the IMF, the 2001 economic crisis was broke out.

Heaven knows why, Kemal Derviş, who then was rarely known at least by the public, suddenly came to someone’s mind in Turkey and was suggested as the savior to the government. At the beginning he was wanted to be assigned as the Central Bank Governor, however the IMF and the World Bank made a special effort for assigning him as the minister. As a matter of fact, the vice president of the IMF, Fischer made the statement that ‘he is a perfect choice and an ideal name for the ministry’. At that time Derviş, despite not being a deputy, was assigned as the minister and granted with supernormal authorizations. Kemal Derviş, who was welcomed like a pop star and followed by the media 24 hours a day, in a little while, prepared ‘Transition to the Strong Economy Program’ with the supports of the IMF and the World Bank. The program, with reference to the vice-president of the IMF, was named as the Derviş-Fischer Model. Derviş embarked on so fast that the Parliamentary began to enact every demand from the IMF and the World Bank.

The acts that were enacted one after the other, at that time, hit the headlines as ‘15 Acts in 15 Days’.

With the ‘Transition to the Strong Economy Program’ carried out by Kemal Derviş, all the international institutions, especially the IMF and the World Bank blew money on Turkey, so to speak. During this process some economic recovery was succeeded. At that very moment, by the demand of leader of the Nationalist Movement Party (NMP) it was decided to go for the general election of November 3, 2002.


It is known very well that the general election of November 3 is the beginning of the 16 year JDP reign. It is useful to look at the before election level of the exchange rate. Before the February crisis, i.e. in February of 2001, the exchange rate of dollar was 0.66 TL. After the outbreak of the February crisis it went up to 1.44 TL. If the Central Bank’s end of year exchange rates are taken into consideration, the exchange rate by the end of 2000 was 0.67 TL (six zeros deleted) and it rose to 1.45 TL by 115 %. During the general election November 3, in which the JDP came into power, the level of the exchange rate of dollar was 1.6 TL.  According to the figures of the Central Bank, the exchange rate of dollar was 1.67 TL by 4th November 2002.


In the past 16 years the JDP governments have ruled the country. It will be illuminating to ascertain the increases in the exchange rate of dollar during this period, taking the general elections as basis. We’ll begin with the assessment of the first JDP government period, which continued between 3rd November 2002 and 22nd July 2007. After the JDP took power in November 3, the exchange rate of dollar was 1.6 TL. This period was the most tranquil period of the exchange markets. At the end of 2003 and 2004 it was 1.4 TL and 1.3 TL respectively, and was 1.3 TL at the end of 2005. At the end of 2006 there occurred a slight increase in the exchange rate of dollar, rose to 1.4 TL.

The project of the equalization of 1 TL to 1 dollar was raised at that time. But the political course of events, from the year 2007 on, moved the exchange rate of dollar quite away from the 1 TL threshold level. The JDP government formed after the first election is called the apprenticeship period. This period was recorded as the most successful period both in terms of economic indicators and exchange rate.


The JDP won the elections that took place in 22nd July 2007 by a record high level of vote rate. The period of government formed after this election is called the journeymanship period. The political tensions came out at this period. The presidency elections, the Ergenekon and the Balyoz operations took place in this period. The political tensions began to make themselves evident in the economic indicators.

The exchange rate of dollar, at the end of 2007 at first place, fell to 1.1 TL, however from the year 2008 on, after the closure case against the JDP, it began to rise sharply. It changed to 1.5 TL in 2008, 1.4 TL in 2009, 1.5 TL in 2010 and 1.9 TL in 2011.


The JDP once more took the power with a overwhelmingly high vote rate in the general elections that took place in 12th June 2011. The periods after this election are called the period of mastership. But the deterioration in the economic indicators, especially in the exchange rate of dollar, escalated in this period. The exchange rate which was 1.9 TL at the end of 2011 dropped to 1.7 TL in 2012 and rose to 2.1 TL, 2.3 TL and 2.9 TL in 2013, 2014 and 2015 respectively.

In the year 2015 two general elections were gone for. In the first one, June 7, the JDP lost the majority for coming to power alone and regained it in the second one, November 1, with a high vote rate. The exchange rate of dollar was 2.9 TL at the end of 2015, it increased to 3.5 TL and 3.7 TL in 2016 and 2017, respectively. Besides, the Coup Attempt of July 15 by the FETO occurred in this period. The state of emergency was declared after the Coup Attempt. The exchange rate continued to increase during the state of emergency.


The increase in the exchange rate of dollar, namely the loss of blood in TL, continued in 2018. The exchange rate of dollar, which was 3.7 TL at the beginning of 2018, increased to 4.90 TL by July 31. In 2018 the June 24 general election took place and once again the JDP won the election. The exchange rate continued to rise after the elections, whereas a more dramatic escalation that will probably be experienced after September is a source of concern.


In the February crisis of 2001, a 115 % increase was experienced. After this increase, thousands of business bankrupted. The crisis also caused an enormous change in the course of political and social life of the society. In the 16 year reign of the JDP governments there has been a 212 % increase in the exchange rate. And there have not been a major crisis in this period.

In developing countries such as Turkey, the exchange rate is of great importance. Price increases and the other economic indicators are calculated by taking exchange rate of dollar as basis. Moreover increase in exchange rate of dollar has been taken as the indicator of economic crisis for years. And after the economic crises, some political and social changes have taken place. Therefore the change in exchange rate has multidimensional importance. The enormous increase in exchange rate of dollar in the past 16 year has heavily deteriorated the balance-sheets of the all companies from small businesses to giant holdings. The damage caused by this deterioration has not been known yet. It is worried about that any little stumbling of the construction sector, known as the Achilles’ heel of the economy, may trigger a crisis paralyzing the whole Turkey. In the forthcoming days, we will see the effects of the enormous increase in the exchange rate of dollar.


Years Price of Dollar Change Difference
1996 0.1084
1997 0.2066 0.10 91 %
1998 0.3157 0.11 53 %
1999 0.5435 0.23 72 %
2000 0.6762 0.13 24 %
2001 1.4558 0.78 115 %
2002 1.6501 0.19 13 %
2003 1.4021 -0.25 -15 %
2004 1.3447 -0.06 -4 %
2005 1.3503 0.01 0 %
2006 1.4145 0.06 5 %
2007 1.1666 -0.25 -18 %
2008 1.5314 0.36 31 %
2009 1.4967 -0.03 -2 %
2010 1.5473 0.05 3 %
2011 1.9008 0.35 23 %
2012 1.7889 -0.11 -6 %
2013 2.1375 0.35 19 %
2014 2.3346 0.20 9 %
2015 2.9277 0.59 25 %
2016 3.5308 0.60 21 %
2017 3.7843 0.25 7 %

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