In 2023, Turkey’s central bank recorded a loss of 818.2 billion liras ($25 billion), marking a significant shift from previous years of profits. The loss was attributed to the sharp increase in interest rates and the expenses related to a government-supported savings program aimed at protecting depositors from currency devaluation. This financial outcome stands in contrast to the 72 billion-lira profit the central bank had recorded in 2022.
The significant loss also serves to draw attention to the KKM mechanism, which was implemented in late 2021 to support the lira and has proven challenging to undo. As a result of this loss, the central bank will not be able to transfer funds to the nation’s Treasury, a development that comes at a time when the country is facing a substantial budget deficit.
The repercussions of this financial result underscore the complexities of the economic challenges facing Turkey and the intricacies of managing currency stability. The central bank’s loss reflects a broader trend of economic uncertainty and underscores the need for effective policy measures to address the country’s financial vulnerabilities. As Turkey grapples with mounting deficits and currency instability, finding sustainable solutions to address these issues will be crucial in steering the country towards a more stable economic future.
