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 Following the 1974 division of the island, Turkish Cypriots
adopted the Turkish Lira (TL) but the Cyprus pound remained legal
tender until May, 1983. In that year an extensive study was undertaken
into the possibility of issuing a TRNC currency up to the level of
foreign currency reserves, which were at the time
substantial, but a political decision was taken that the Turkish
Lira should remain the legal tender. The Cyprus pound is now
considered to be a foreign currency and is subject to foreign
exchange regulations, but is used as a parallel-market
trading currency together with British pound and US dollar.
The Central Bank authorities issue daily rates based on the
previous days free-market rates and the figures provided by the
Central Bank of Turkey. As a consequence, the rapid depreciation
and high inflation of the mainland have been imported into North
Cyprus. There were particular difficulties during the first half
of 1994 when the Turkish Lira lost well over half its value
against the US dollar. This has prompted the TRNC government to
seek the feasibility of introducing or adopting a more stable
accounting unit in North Cyprus.
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