The Egyptian economy has been in a tight spot for a while. Its internal issues were compounded by an unfavorable global conjuncture. As the world was turning away from globalization, the dwindling international capital flows and foreign direct investments were shifting towards alternatives like India. Consequently, Egypt lagged behind in the escalating global competition for diminishing capital flows. Its foreign exchange deficit was truly putting a strain on the economy. As this situation persisted,
The Egyptian economy has been in a tight spot for a while. Its internal issues were compounded by an unfavorable global conjuncture. As the world was turning away from globalization, the dwindling international capital flows and foreign direct investments were shifting towards alternatives like India. Consequently, Egypt lagged behind in the escalating global competition for diminishing capital flows.
Its foreign exchange deficit was truly putting a strain on the economy.
As this situation persisted, recent measures such as currency devaluation, transitioning to a free exchange rate regime, and inflation targeting in monetary policy started to change the picture.
Just then, with the "link severed" announcement in Türkiye, minds suddenly became clouded and forecasts weakened, leading some to use Egypt as an example.
Their real aim is to push Türkiye into a stand-by arrangement with the IMF, even coerce it if necessary. And they will continue to do so as they have been for years.
However, those trying to convince Türkiye by citing Egypt as an example have missed something crucial.
Today, Egypt is experiencing what Türkiye went through in 2001. In other words, Egypt, held up as an example for Türkiye, is grappling not with the vastly different problems of today's Türkiye but with the problems of the Türkiye of the past.
Let me get to the real issue behind Egypt's current prominence and the examples being presented so that it's understood why I'm discussing the IMF in this article. Egypt is being cited as an example not because of the policies it has implemented but because its policies can be considered to have been made under an IMF stand-by arrangement.
The country changed its policies not because of its own preferences but to conclude an IMF stand-by agreement it had been negotiating for two years. Those citing Egypt as an example did so based on this information.
However, in the current circumstances, it would be expected that Türkiye, which has successfully passed all the toughest stress tests that could be envisaged globally, would continue its path without the IMF. And it should be so. Making a stand-by agreement with the IMF means saying, "We can't manage the economy, so please take over," which is the IMF's loan policy. It is subject to the condition of imposing an economic program.
Pay attention; I'm not saying it won't lend without bringing a program, I'm saying it can't.
Against the confusion that has arisen in Türkiye and the IMF supporters who have found an opportunity and emerged, Minister Şimşek tried to take the lead by stating that he expects a foreign exchange inflow after the elections.
There are signs of this. Interest in Türkiye from funds has increased. It can be understood from the contacts of the intermediary institutions preparing to come. Fitch was the first to take the expected credit rating upgrade step and rescued the market from Moody's unnecessary delays. These can be seen as signs of foreign exchange inflows.
Yes, parameters in the Turkish economy can achieve a healthier outlook with foreign exchange inflows. In other words, severed links can be reconnected with foreign exchange inflows.
And Türkiye is not incapable of achieving foreign exchange inflows. Forcing Türkiye into a stand-by agreement with the IMF just for foreign exchange liquidity is neither rational nor fair.
In fact, the greatest service to Türkiye is to liberate it from being indebted to the IMF. This has been done.
In any case, despite the IMF supporters who do not hesitate to go against Türkiye's policies and incite the public against the Turkish economy...
In the end, Türkiye is an interesting place. If we remember the recent general election, it is a country where politics that would never be accepted in election campaigns anywhere else in the world, such as making a stand-by agreement with the IMF, has been seen. There is no such election promise in the world because there is no example of a country that has been able to solve its problems with the IMF.
Türkiye is not the old Türkiye anymore; it is now an economy with enough depth and diversity to continue its path without the IMF.
Wages in Egypt
So, when Egypt came into the spotlight, a new day dawned for IMF supporters; targeting wage increases. They want to persuade Türkiye to accept the unproven wage-inflation spiral theory econometrically.
Using Egypt's resurgence to argue for not increasing wages in competitive labor-intensive sectors and embracing the wage-inflation spiral idea is like saying wealth tax is an alternative. In my opinion, both are controversial.
The issue of low wages in Egypt is a very old one.
For a long time, especially in the textile sector, the debate has revolved around the competition with Egypt based on wage levels. However, since this debate began, Egypt has not managed to worry about and succeed in finding ways to do a job done by 200 workers in Egypt with just 50 or 100 workers in Türkiye.
Developments in technology, such as automation, robots, artificial intelligence, open up space for Türkiye to reduce the number of workers by at least half. These investments could have been made long ago.
They can still be made. Türkiye has experienced, and is experiencing, the difficulties of being an SME economy. Now, by using the flexibility of being an SME economy to perform labor-intensive tasks cost-effectively with the benefits of technology.
Enterprises with high technology adaptation can compete against cheap labor. They have all the know-how they need to do this.
It's time to stop offering or praising cheap labor to Türkiye. We need to talk about benefiting from technology.
