Currency Reform in Turkey and Lessons from Re-Denomination and Euro Changeover

Re-denomination was not only a zero dropping and new coin minting operation but also a significant milestone in Turkey. Before the currency reform, multiple zeros had posed several difficulties in expressing monetary values, transactions, bookkeeping and statistical records, data processing software, payment systems, price labels etc. So, removing six zeros from national currency became a technical and psychological need in Turkey. In the first phase of the currency reform, six zeroes were removed from the national currency and the prefix “New” was added to the currency’s name as of January 1, 2005. At the beginning of the reform, it was also decided that in the second phase, the prefix “New” used during transition period would be removed and traditional currency name, “Turkish Lira” would be reverted back. For that stage of the reform, the Council of Ministers took the decision and the operation started on January 1, 2009. This paper focuses on the currency reform in Turkey and lessons from re-denomination and Euro changeover in different perspectives. The first section of the paper deals with two stages of the currency reform; the background, other countries’ experiences, legal, financial and technical aspects of the operation and the tasks of different institutions namely the Central Bank, Minister of Finance, Ministry of Industry and Trade, Under secretariat of Treasury, Banks and Credit Institutions, Capital Market Board, Turkish Statistical Institute, Banking Supervision and Regulation Agency. The second part discusses organizational and communicational aspects, the physical changeover and its effect on banking and retail sector, the withdrawal of legacy notes and coins and lastly the impact of the operation on prices. The benefits of the operation and the general evaluation of the reform are summarized in conclusion.