Turkey’s central bank
In 2023, the Turkish central bank experienced a loss of 818.2 billion liras ($25 billion), marking a significant shift from previous years of profitability driven by substantially higher interest rates and the expenses associated with a government-backed savings initiative aimed at protecting depositors from currency devaluation.
This outcome contrasts sharply with the 72 billion-lira profit recorded in 2022, necessitating the central bank to forgo a transfer to the national Treasury during a period of significant budgetary shortfall. However, the substantial loss also underscores the ongoing scrutiny of the mechanism—referred to locally as KKM—implemented to serve as a safety net for the lira. This mechanism was introduced by authorities in late 2021 and has proven challenging to dismantle.
Hakan Kara, the central bank’s former chief economist, said on social media platform X that the loss is a reflection of the “world’s most costly economics experiment,” referring to KKM.
Turkey’s central bank is not the only monetary authority facing financial challenges this year. Institutions like the European Central Bank have also reported their first losses in decades due to previous stimulus efforts and increased borrowing expenses. In Turkey, persistent low interest rates accelerated inflation over the years. Consequently, policymakers initiated interest rate hikes in June 2023, raising the benchmark rate from 8.5% to 50% by last month.
