Turkey’s central bank makes $10 billion in a day

The monetary authority projected an annual loss of around 70 billion liras ($5.2 billion) on Dec. 30 but ended the year with 60 billion liras of profit.

This reversal of presumed fortunes in a single day is a remarkable turnaround for the central bank and its now smiling stakeholders.

In February 2022, the Ministry of Treasury and Finance -- as the central bank’s biggest stakeholder -- will receive dividends that may be ploughed back into the economy to steady a ship of state being tossed on the high seas of insolvency.

In the last few months, things have not gone Turkey President Recep Tayyip Erdogan’s way.

He recently rolled out a cocktail of compensatory measures to those lira investors who had made losses in Turkey. Erdogan also pressured the central bank to lower its interest rates and this sent the lira tumbling against the dollar last year, while pushing inflation past 36%.

The bank declined to comment on this extraordinary boost to its equity and potential assets on its balance sheet, thereby growing the value of its shares which will have a multiplier effect on a struggling economy.

This means that when the central bank has more money, then the more money flowing around the economy makes it easier for people to get loans and to make big investments, which helps the economy get going again.

According to some sources, one possible explanation for this sizeable overnight profit boost lies in the sale of foreign-exchange reserves to the Treasury.

The lira’s depreciation makes foreign reserves more valuable in local currency, but this will only reflect positively on the bank’s profit column when those reserves are actually sold.