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Turkey

A new currency law in Turkey aims to resolve the difficulties caused by hyperinflation in the country over the past two decades. The hyperinflation that started in the 1970s meant that during the 1980s new banknotes in larger denominations came into circulation to meet the cash demand in the economy. For the past few years the highest denominated banknote has been TL20 million, which is also the highest denominated banknote in the world. Use of figures with multiple zeros has created many technical and operational problems in particular for banks and the treasury. The creation of official financial records has also proved troublesome.

Hyperinflation has slowed in the past few years. And, as a result, the government has decided to change the currency as a part of the economic (reform) programme. The Law on the Currency Unit of the Republic of Turkey, No: 5308, to be put into effect by January 1 2005, creates a new currency unit for the Republic - the New Turkish Lira (NTL). The sub-unit of the New Turkish Lira is New Kuru (NKR). The symbol of NTL will be YTL in domestic and TRY in international markets.

When converting Turkish Lira values into NTL, TL1 million will be equal to one NTL. One NTL will be equal to 100 New Kuru. The composition of denominations for NTL banknotes will be one, five, 10, 20, 50 and 100 and for the NKR coins will be one, five, 10, 25, 50 and 100.

According to the new 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 specified conversion rate.

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 January 1 2006, the "New" (Yeni) will be dropped from the name of the currency to become Turkish Lira.

As a precaution, to avoid problems that might occur due to the redenomination process, several amendments have also been made. Initially, because 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 December 31 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 will be invalid. 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 (IZE) 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.

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