Turkish Cypriots are paying more for a cup of coffee than United States congressmen, economist Mertkan Hamit said.

In a social media post, he pointed out that an iced americano at the branch of international coffee chain Starbucks on Washington DC’s Capitol Hill costs $4.35 after tax, equal to around 154TL or €4.22.

However, he said, in coffee shops on Famagusta’s Salamis road, the same drink can cost as much as 175TL, equal to $4.95 or €4.81.

This, he said, is despite commercial real estate on Capitol Hill costing more than six times as month to rent as the equivalent in Famagusta, and despite salaries in Washington DC far outstripping those in northern Cyprus.

The Cyprus Mail found that prices are slightly more bearable in northern Nicosia, with international chain Gloria Jeans and Turkish chain EspressoLab selling iced americanos in the north for 150TL (€4.12 or $4.24).

Local chain Ovis prices its online orders in pounds sterling, with an iced americano costing £3.55 (154TL, €4.22, or $4.35), exactly the same as the Capitol Hill branch of Starbucks.

While there are no branches of Starbucks in the north, there are in the Republic, with an iced americano at a Starbucks in the Republic costing €3.85 (140TL or $3.97) – cheaper than both in the north and on Capitol Hill.

Asked by the Cyprus Mail why coffee is so comparatively expensive in the north, Hamit said this is the “million-dollar question”.

“There are multiple reasons, and it is not possible to focus on a single reason. The figures we have show us that prices in the north have increased more than fivefold in the last three years,” he said.

“When any business determines its prices, we can see its concerns about the future as well as its costs. There is a perception in the market that there is no trust in the Turkish Lira yet, that the exchange rate is seen as a risk, and that there are expectations that inflation will increase, and that therefore salaries will increase.”

He added that at the same time, the north has also seen increases in the price of energy and other outlays expected of a business, and that as such, “a business owner will decide on prices according to future risks”.

He also described the north as a “multi-currency market”, as evidenced by the fact that Ovis charges for online orders in pounds sterling.

“For this reason, sensitivity to exchange rate movements is high,” he said, though he did note that after rapidly decreasing in the early part of the decade, the Turkish Lira stabilised in 2024 and actually grew against the Euro between October and January.

This progress, however, is not expected by many to be a permanent step in the right direction according to Hamit.

“In other words, the Turkish Lira has gained significant value. Businesses are convinced this situation is temporary, and therefore they are pricing according to the exchange rate they expect in the future, not the current exchange rate,” he said.

To this end, he said economists are predicting that the Turkish Lira will “gradually lose value in line with interest and inflation targets after the second half of 2025, and we can assume that it will reach its fair value in the market”.

“Thus, coffee will then be seen as comparatively cheaper, but since pricing is currently offered in overvalued Turkish Liras, we are experiencing abnormally expensive prices when compared to the euro exchange rate,” he said.