Record loss for the Central Bank in two years: 1.5 trillion Lira vanished

The balance sheet of the Central Bank of the Republic of Turkey (TCMB) for 2024 has been published in the Official Gazette. The Bank incurred a total loss of 700 billion 437 million TL last year. Thus, the Central Bank has recorded a massive loss for the second consecutive year.

TOTAL LOSS IN TWO YEARS EXCEEDS 1.5 TRILLION LIRA

The TCMB had also announced a loss of 818 billion 182 million TL in 2023. Consequently, the total loss reported over the last two years has reached 1 trillion 518 billion 619 million TL. This figure ranks among the highest losses in the history of the Central Bank.

PROFITABLE YEARS ARE BEHIND

Yet, the TCMB had reported a profit of 57.5 billion TL in 2021 and 72 billion TL in 2022. Under normal circumstances, when the Central Bank makes a profit, it transfers this amount to the Treasury. However, when a loss is incurred, this amount is kept in the balance sheet under the "prior year losses" item and is offset against future profits.

REASONS FOR THE LOSS: FOREIGN EXCHANGE DEFICIT AND KKM

Two main reasons stand out as being influential in this massive loss for the TCMB:

Foreign exchange open positions

Exchange rate difference payments made for foreign exchange-protected deposit (KKM) accounts

In particular, the payments made for the foreign exchange-protected deposit system created a heavy burden on the Bank's financial structure.

KKM BURDEN TRANSFERRED TO TCMB IN 2023

With the regulation accepted by the Grand National Assembly of Turkey in July 2023, exchange rate difference payments regarding Turkish Lira-converted KKM accounts began to be made by the Central Bank instead of the Treasury. This decision created a major burden on the TCMB's balance sheet.

INTEREST RATES AND SECURITIES ALSO INCREASED THE LOSS

In addition to exchange rate difference payments, interest expenses that increased due to rising interest rates in 2023 and 2024, as well as decreases in the value of securities, were also among the factors that reduced profit.

EVEN THOUGH RESERVES TURNED POSITIVE, IT WAS NOT ENOUGH

The TCMB's net foreign exchange reserves, excluding swaps, had turned positive at the end of May 2024 after remaining at negative levels for a long time. However, this development was insufficient to prevent the loss.