High interest burden bite Turkish central bank with historic loss amid inflation battle
File photo shows entrance of Central Bank of Republic of Türkiye (CBRT) headquarters in Ankara, Türkiye, accessed on May 28, 2024. (AA Photo)
The Central Bank of the Republic of Türkiye (CBRT) recorded a net loss of ₺700.4 billion ($21.7 billion) for the year 2024, according to its annual balance sheet released on Monday. This marks the second-largest loss in the institution’s history and follows a record deficit of ₺818.2 billion in 2023.
The back-to-back losses underscore the financial toll of the central bank’s recent policy shift aimed at reining in inflation and stabilizing the lira. After years of unconventional easing, the CBRT began tightening monetary policy in mid-2023, significantly raising interest rates to restore investor confidence and cool domestic demand.
The high interest rate environment, while essential for disinflation, has substantially increased the bank’s funding and sterilization costs, contributing to the overall deficit. In addition, previous exchange rate support mechanisms—particularly those involving foreign exchange-protected deposits—have imposed lingering financial burdens on the central bank’s balance sheet.
The policy interest rate, which was raised to 50% on March 22, 2024, has been reduced to 42.5% over the last three monetary policy meetings since December, with cuts of 250 basis points at each meeting.
Total assets expand with export boost
Despite the loss, CBRT’s total assets expanded to ₺8.59 trillion by the end of 2024, up from ₺6.92 trillion a year earlier. This reflects the broadening of its monetary operations and liquidity management tools amid ongoing efforts to rebalance macroeconomic fundamentals.
The bank extended ₺526.7 billion in rediscount loans during the year, primarily to support export-oriented and foreign exchange-earning sectors, aiming to boost external trade and improve the current account balance.
CBRT’s Ordinary General Assembly is scheduled for April 30, 2025. The meeting will cover approval of the 2024 financial statements and include elections for two positions on the Bank’s Assembly and three on the Auditing Committee.
