The Strategist

Turkey waves goodbye to dollar in international trade

08/07/2018 - 15:42

Turkey is starting barter trade. The new system will reduce the demand for foreign currency in the economy, as well as ensure an increase in exports.

Following the trade in national currencies, Turkey is moving to yet another new model against the dollar. In order to weaken influence of the recent speculative growth of foreign exchange rates on the economy and minimize use of foreign currencies in foreign trade, Turkey begins the practice of barter transactions. Thanks to barter trade, which implies direct exchange of goods or services, the economy will reduce demand for foreign currency.

With the help of this system, which is highlighted in the government's 100-day action program, Turkey, on the one hand, will be able to trade without using foreign currencies, and to increase its exports to countries experiencing financial difficulties - on the other. The Ministry of Trade is conducting a country analysis to initiate such barter transactions.

The Ministry has already applied the practice of offsetting goods in trade with Iran and Russia. Up to 2008, using this system, about 2% of foreign trade (3.5 billion dollars) were sold in trade with different countries. Barter trade as a favorite method went into decline when the sanctions against Iran were lifted.

Africa and Central Asia

It is noted that Africa and Central Asia are the most suitable markets for Turkey in terms of barter trade. The Export Bank has already conducted research on this topic. It is planned to increase exports to those African markets that cannot trade with the use of monetary instruments within the model of "financing in exchange for raw materials". There are many countries in the world that use the barter trade model. One of them is China, which, thanks to the skillful activities of its companies, buys mineral and natural resources from African countries, and in exchange implements projects related to the construction of infrastructure, roads, and hydraulic structures through its construction companies. The Chinese government has set up a company to carry out barter transactions in the African market.

Infrastructure in exchange for raw materials

With the use of practices aimed at reducing Turkey's dependence on foreign currency, no national currency unit or foreign currency will be used in trade operations. The resulting goods can be exchanged for another product. Or Turkey in exchange for imported goods will be able to take on infrastructure work in a certain country.