Tuesday, January 04, 2022
Erdogan explains: The crisis is over
Turkish central bank shifts billions
Mysterious transfer postings by the Turkish central bank shortly before the end of the year cause speculation. Insiders believe that a profit should be reported despite the currency crisis. Meanwhile, President Erdogan reassures his compatriots: The worst is over.
Unusual shifts in the billions in the balance sheet of the Turkish central bank sparked speculation. The data published by the central bank show a changeover of the valuation account between 30 and 31 December amounting to around 124 billion lira (8.3 billion euros). It closed the year with 54 billion lira. Another account called “miscellaneous items”, which contains the bank’s profits, was even cleaned up by around 130 billion lira. At the end of the year it contained a good 60 billion lira.
The central bank did not respond to a request for comment on the changes. Economists and bankers suspect, however, that the changes could enable the central bank to post a profit for 2021 despite the currency crisis and billion-dollar interventions in the currency market. Surpluses are usually transferred to the Treasury, the main shareholder in the central bank, in April. As of December 30th, the bank was “unable to transfer profits to the treasury,” said a banker who wanted to remain anonymous. “But on December 31st, a transfer of more than 100 billion lira became possible.”
Analysts want explanation
The valuation account contains unrealized gains and losses from the revaluation of foreign currencies, gold and other assets and liabilities based on changes in the price of the lira and gold in international markets. A sharp decline in the account in 2019 gave rise to similar speculations at the time – namely that the central bank would transfer funds to the treasury, which it then did.
According to Haluk Burumcekci, founder of the consulting firm Burumcekci Consulting, there have never been such big changes overnight in the past. “It appears that with this operation the central bank ended the year in profit and was able to transfer the profits to the Treasury Department in April,” he wrote on Twitter. “I hope that in the coming days it will be explained to the public how this major change came about.”
Erdogan: “We have the worst behind us”
Meanwhile, Turkish President Recep Tayyip Erdogan tried to reassure his compatriots because of the economic turmoil surrounding inflation and the currency crisis. “We have left the worst behind us,” he told members of his ruling AK party. “From now on it is time to reap the fruits of our efforts and show our people that we are moving closer to our goals step by step.”
Critics accuse Erdogan, however, of being jointly responsible for the economic crisis. The president has repeatedly put pressure on the central bank and called for a loose monetary policy. In spite of high inflation and the currency crisis, the central bank lowered the key interest rate again in mid-December, while many economists are calling for interest rate hikes.
The Turkish lira lost around 44 percent of its value in 2021. The already high inflation climbed even faster than expected in December and is now at 36 percent at its highest level since September 2002. “We will rid our country of this image that it does not deserve by removing the inflation bubble,” emphasized Erdogan further. Some economists, on the other hand, expect consumer prices to continue to rise. “In March inflation is likely to reach 40 to 50 percent,” said Özlem Derici Sengül, co-founder of the consulting firm Spinn Consulting, recently.