The hyperinflation that started in 1970’s has been affecting Turkish economic life and has caused the expression of economic values by billions, trillions or even in quadrillions. From 1981 new banknotes in larger denominations started to be circulated due to this high inflation to meet the cash demand in the economy. For the last few years the highest denominated banknote is 20.000.000 TL, which is also the highest denominated banknote in the world. Use of figures with multiple zeros has created many technical and operational problems for almost every institution such as banks, treasury, official financial records and it also caused difficulties for citizens. The hyperinflation slowed down in the last few years. Meeting lower inflation rates, the Government decided to change the currency as a part of the economical (reform) program. According to the "Law on the Currency Unit of the Republic of Turkey, No: 5308" ("Law")1 to be put into effect by 1 January 2005, the new currency unit of the Republic of Turkey is the New Turkish Lira (“NTL”). The sub-unit of the New Turkish Lira is “New Kuruş” (“NKR”). The symbol of NTL will be YTL in domestic, TRY in international markets.
Pursuant to the Law, while converting Turkish Lira values into NTL, one million Turkish Lira (1.000.000 TL) will be equal to one NTL (1 NTL). One NTL will be equal to one hundred New Kuruş (100 NKr). The composition of denominations for NTL banknotes will be 1, 5, 10, 20, 50 and 100 and for the NKR coins will be 1, 5, 10, 25, 50 and 100.
According to the Law, all references made to Turkish Lira or Lira in laws, other legislation, administrative transactions, court decisions, legal transactions, negotiable instruments and other documents that produce legal effects as well as payment and exchange instruments shall be considered to have been made to New Turkish Lira at the conversion rate specified.
Current banknotes and coins will be in circulation until the end of 2005. Throughout 2005, Turkish Lira and New Turkish Lira banknotes and coins will concurrently be in circulation for one year. After 1 January 2006, the "New" (Yeni) expression that is used before the Turkish Lira will be removed and the currency of the Republic of Turkey will again be Turkish Lira.
As a precaution, to avoid problems that might occur due to the redenomination process, several amendments have also been made. Initially, as two currencies, TL and NTL, will be in concurrent use in 2005, all price labels and tariffs shall display the prices both in NTL and TL until 31 December 2005.
All bank accounts will also be converted from TL to NTL. All payments will be performed by NTL and therefore money circulation is going to be both in NTL and TL for 2005. New chequebooks will be prepared. Former cheques written in TL will automatically be converted to NTL, if they are drawn in the year 2004. However, if the cheques are drawn in TL in 2005, they are not going to be valid. The same system will apply for promissory bonds as well.
A special case applies to nominal values (per value) of the shares of publicly owned companies. According to the current Turkish Commercial Code, the nominal value of the shares of the joint stock corporations should be at least 500 TL and the increments must be by 100 TL. There is a draft law regarding aforementioned possible problem. Pursuant to the draft law, "The nominal value of shares is at least 1 NKR. This value can be increased only by at least 1 NKR."
Moreover, there will be some amendments on the stock exchange market. The nominal values of the shares of 99% of the companies listed in the Istanbul Stock Exchange (ISE) are 1.000 TL. In order to avoid any problems the market price currently announced for a stock with nominal value of TL 1,000 will be announced for a stock with nominal value of 1 NTL. Due to the fact that smallest unit is NKR price ticks that will be expressed in NKR will be necessary therefore the prices will be published with additional two digits for NKR.
As a result, a great deal of legislative work regarding this process has been conducted and still there is more to come. There are still some areas that should be regulated such as implementation of the Law to cheques, bonds, shares of publicly owned companies, right to vote and right to receive dividends in joint stock corporations. Nevertheless, even though there is plenty of legislative work to be conducted with regards to the legal aspects of NTL, it would be not be wrong to indicate that the Turkish economy has entered a new era with the new currency. The new currency is expected to contribute health to the country's economic system and bring respect to the Turkish currency.
1. Published in the Official Gazette on 31 January 2004
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