On the first day of next year Turkey will stop being world champion for the number of zeros in its currency.
In January the Assembly passed a law authorising the government to redenominate the lira by throwing away six zeros from the currency. The lira became bloated over decades of endemic inflation, which made every Turk a millionaire. The minimum wage is TL303 million ($230). Since 1980 the central bank has been obliged to issue new banknotes every two years.
"Turkey is the only country in the world with a 20,000,000-lira banknote," says Ali Babacan, the minister of state for Treasury, addressing the Assembly. "You will also remember the case of the tourist who got a fine and fainted when he learnt the amount."
The profusion of zeros in Turkish accounts has caused problems in SWIFT, the international credit transfer system between banks. Special calculating machines have had to be manufactured for Turkey, where a quadrillion (one followed by 15 zeros) became familiar to everyone – not just astronomers and mathematicians.
Making the lira more respectable has come within sight because the economy, guided by the IMF since 1999, has been doing remarkably well. "For Turkey, 2003 proved to be a vintage year in terms of both the remarkable performance of the macro-economy and the stellar performance of Turkish markets relative to their peers in emerging markets," says Bear Stearns analyst Tim Ash.
The best news was on the inflation front. Wholesale price increases of 14% and consumer price rises of 18% were the lowest in nearly 30 years. Growth is likely to have surpassed the 5% target.
Exports were the leading driving force. According to the Turkish exporters association, merchandise exports grew by 4% to reach a record $48 billion.
Interest rates fell sharply. At year-end the yield on the benchmark treasury bonds plunged to 25%, compared with nearly 55% a year earlier. Capital flight was reversed, posting a $4 billion surplus compared with a deficit of $3 billion.
The Istanbul Stock Exchange 100 rose by 75%. Foreign equity holdings grew 50%.
Prospects for 2004 are good but there is widespread uncertainty about the government's intentions.
"In order to sustain the economic growth and disinflation performance of the last two years that has been beyond the wildest expectations, the authorities must keep implementing economic and institutional reforms," cautions Morgan Stanley economist Serhan Cevik.
The IMF standby agreement has entered its last year and the Fund's hold on the government has weakened. Industrialist Tuncay Ozilhan, the outgoing president of the Turkish Businessmen's Industrialists Association, warns that 2004 could be a year of "miracles or disasters" and has asked the government not to yield to "complacency and populism".
Prime minster Tayyip Erdogan has already upset the markets by raising the minimum wage by 34% to TL303 million, much higher than the inflation target. Fitch has labelled the move "fiscal populism".
The IMF might go but the markets will stay and will penalize the government severely for any digression from the course of fiscal discipline. Soon after the minimum wage increase was announced, interest rates on treasury bonds went up from about 24% to 27%.