Economist Mertkan Hamit: Expensive Government, Poor Service

Speaking on Ulaş Barış’s Gündem program on Kıbrıs Postası TV, Hamit noted that it was clear from the start that the economic policies implemented in Turkey could not be fully applied in Northern Cyprus. “We knew the programme could not be implemented one hundred percent, but some steps were taken, particularly concerning the Central Bank’s foreign exchange reserves,” he said.

Highlighting the end of the low-interest policy as a positive development, Hamit added, “The economy was cooled down and restructured to some extent. In that sense, there has been partial success; inflation has declined, and exchange rate-related price increases have relatively eased.”

Despite this, Hamit said that the same sense of stability seen in Turkey did not emerge in Northern Cyprus. “Apart from the minimum wage increase, there is no serious economic policy. The wage hike merely reflects inflation. No measures are being taken to address production, costs, or structural issues,” he said.

Discussing the 2026 budget, Hamit stated, “The ratio of the budget to gross national product is around 78 percent. This is abnormal. Such a budget cannot be sustained without borrowing, and spending can no longer be covered by tax revenues.”

“A Costly Government, Poor Service”

Hamit summarized the state of public finances as follows:
“We are paying for a costly government while receiving poor service. The cost of government is borne by the people. Everyone carries this burden through income tax, corporate tax, or indirect taxes. Yet there is no noticeable improvement in public services.”

He added that this situation negatively affects the private sector as well: “Businesses know they will face higher taxes, increased costs, and no structural reforms. Therefore, they have no incentive to lower prices. Even if inflation in Turkey decreases, the high cost of living here will persist.”

“Purchasing Power in Euros Fell by 30 Percent”

Hamit noted that the cost of living in Northern Cyprus is now higher than in Turkey. “A person earning €1,000 in January 2024 has lost 30 percent of their purchasing power by the end of 2025. Those earning in Turkish lira may not feel it, but in euro terms, this country has become 30 percent more expensive in two years,” he said.

Turning to the tourism sector, he observed: “The number of European tourists has dropped. Although visitors from Turkey have increased, high-spending European tourists are no longer coming, because the quality of service does not match the prices.”

“Poverty and Inequality Are Deepening”

Hamit emphasized that wages are not keeping pace with rising prices: “Private sector salaries have fallen behind, which deepens social inequalities. No measures are being taken to address this.”

Using the Republic of Cyprus as an example, Hamit said: “In the south, inflation is not a major issue, the budget runs a surplus, and VAT on basic needs has been lifted. Here, we are forced to increase taxes, which further erodes purchasing power.”

“Dependence on a Single Source Is a Major Risk”

Hamit warned that economic dependence on Turkey can no longer be hidden. “Every country has dependencies, but the healthy approach is to build multiple relationships. The Republic of Cyprus maintains ties with Greece, Germany, and the United States. We, on the other hand, have become dependent on a single entity,” he said.

This, he argued, limits the country’s ability to think in diverse ways. “If you depend on a single source, you choose a difficult life. What we need is balance between low and diversified dependencies.”

He concluded that without good governance and transparency, economic dependence will not yield real benefits. “Receiving funds from Turkey is not a solution on its own. Unless these resources are managed well, they create no value. Yet politics has reached a point where even discussing such matters is considered extraordinary. Structural reforms in planning and economic governance are urgently needed,” Hamit said.