A slew of measures was announced in the north on Tuesday to try and stave off the damage to the economy caused by the slide in the Turkish lira that has dramatically affected the cost of living for Turkish Cypriots.
The 23 measures presented by ‘prime minister’ Tufan Erhurman to ‘parliament’ include lowering VAT rates on basic foods, fixing foreign exchange rates for rents, switching to multiple electricity tariffs, discounting property transfer fees and providing incentives to local producers, according to Bayrak website.
Implementation was to be swift, the report said, with the measures to be put in place this week. Turkish Cypriots have seen their purchasing power diminish dramatically in recent weeks as the spat between Ankara and Washington escalated and the fall in the lira rattled global markets.
Economist Erdal Guryay cast a downbeat this week saying: “If the change in the exchange rate continues at this rate, there is a tremendous crisis awaiting northern Cyprus. It will be such a big crisis that you could never imagine. The construction sector is already at a standstill.”
Several construction companies halted credit sales, with deliveries of raw materials including timber, bricks and paint suspended, while a dozen suppliers stopped taking new orders.
One car dealer, speaking to local media, said he had not seen a customer in three days, “a car I sold six-months ago for 40,000TL, will now cost around 60,000TL,” he complained.
The situation was equally bleak for estate agents, who are reeling after rents – which were already sluggish – shot up by 300TL since last week, while many traders said they were in facing an unprecedented situation.
An electronics salesman said there had been a 20 per cent increase in the price of mobile phone units in the space of 48 hours at the start of the week. “We cannot replace the merchandise we sell,” said Fuat Cirik, speaking to Yeni Duzen. “In one single hour the price of phones went up by 50TL.” Computer salesman Ercan Acim added: “As a result of the rate, our business has been reduced to nothing, computer prices rose 800TL compared to last week, and we do not have the funds to replace them once sold.” Jeweller Ecme Avci said sales of gold had plummeted, as people had started to sell rather than buy.
In some cases, depositors requested large transfers from their local bank accounts. For a while, rumours circulated that a 5,000TL limit had been slapped on withdrawals, but the ‘Central Bank’ brushed off the claim.
Former ‘minister of finance’ Zeran Mungan said he was concerned of possible hikes in fuel and energy prices, which would both directly influence the consumer price index.
It was hoped on Tuesday the 23 measures announced would help ease the pain on Turkish Cypriots who have seen their wages go into freefall this month. The aim of the plan is to restore at least some of their purchasing power.
To aid the economy, it had already been reported on Monday that one of the measures would include foreign buyers being allowed to purchase a second house in the north, and also buy three apartments rather than the current two. This was one of the measures announced on Tuesday with the caveat that it would be in place for six months.
It was also announced that property transfer fees for such purchases would be increased to 8 per cent for a first apartment, 9 per cent for a second and 10 per cent for a third.
For Turkish Cypriots, buying houses under 140 square metres as a first residence would be taxed for six months at 1 per cent, and for second homes the tax of 6 per cent would be cut to 4 per cent.
Also under the measures, rents for homes and businesses would be paid based on a fixed exchange rate with foreign currencies, while exchange rates would also be fixed for private-school fees.
Tax applied to rents in foreign currency would also be reduced from 13 per cent to 1 per cent in lieu of fixing the exchange rate
Higher taxes would be imposed on casinos and betting shops for six months, while VAT would be reduced on household products and basic foodstuffs. VAT would also be cut to 5 per cent in restaurants while incentives would be introduced for hotels to meet their needs from local and domestic producers, and for hiring local staff.
Electricity prices would become multiple-tariff with lower rates applying at certain times of the day. To avoid new increases in fuel, there would be hikes in alcohol and cigarette prices. A new tax of 5 per cent on wages would be applied to foreign workers with a work permit who bring their children with them, reports said.
Erhurman said Turkish Cypriot authorities had asked for a meeting with Turkey and that Turkish officials told them they would reply this week. A visit to Ankara would probably not be on the cards, Erhurman said, given what they are dealing with regards Turkey’s own issues. “In any case we can hold this kind of discussion with Turkey over the phone,” he said.
Meanwhile, Turkish Cypriot ‘finance minister’ Serdar Denktash called on people to economise as much as possible as he arrived at ‘parliament’ on a bicycle, saying he had been using it for the past five days.
Denktash said the crisis could not be solved with ‘government’ decisions without action being taken to save money even in ‘state’ buildings such as shutting down air conditioners. These kinds of savings should be made in all homes.
“This is an extraordinary situation. We are being affected by events that do not involve us,” he said. Denktash also said the demand for a change to the euro in the north that had been circulating in recent weeks was not feasible.
Others looked at the positive aspects. ‘Tourism minister’ Fikri Ataoglou said the crisis has helped the sector increase arrivals and that for the Muslim holiday next week, hotels were 90-95 per cent full. He said there had been an increase of 35-40 per cent in organised excursions from Turkey.
Also, Havadis newspaper on Tuesday published a photograph of the hypermarket parking lot in the north of Nicosia, showing it to be packed with Greek Cypriot cars. It said there had been queues at the Ayios Dhometios and Strovilia crossings in the Nicosia and Larnaca districts respectively.
Additional reporting by Nathan Morley
