Turkish Central Bank’s 30 billion lira earthquake donation feared to spike inflation further

Duvar English

Hakan Kara, the former chief economist of the Turkish Central Bank, has said that the bank’s 30 billion lira ($1.6 billion) donation for the earthquake zones will spike inflation further.

"Is the Central Bank's 'donation' to the public sector a donation in practice?" Kaya asked in a tweet. 

“When the Turkish Central Bank makes a donation, it writes it off as expenses, its profits fall and it transfers less profit to the Treasury the next year. In practice, instead of donation, this is the transfer of future profits to the Treasury now. What purpose would it (donation) serve? It would ease the public finance; public deficit and public debt would seem temporarily low and public's interest expense would decrease. What is its risk? If the public sector makes more spending with the temporary feeling of ease due to this transfer brought forward, it would increase inflation,” he tweeted.

Peoples’ Democratic Party (HDP) MP Garo Paylan also commented on the Central Bank’s donation saying it will come back to citizens as “inflation.” He said “What needs to be done is that payments to pro-government (figures) and expenses of waste stop” and these funds are instead transferred for the recovery of earthquake areas.

Turkey launched a donation campaign for the earthquake and raised more than 115 billion lira ($6 billion) from individuals and companies in a live broadcast on Feb. 15 evening. The Central Bank donated the highest amount with 30 billlion liras, leading to discussions.

According to a Central Bank source with the knowledge of the matter, the donation will be paid from the bank’s profits from last year, Reuters reported on Feb. 16.

The top bank transfers its profit from the previous year to the Treasury every April.

The annual profit of the bank is not announced yet but economists calculate from preliminary data that the central bank recorded a profit of 40-50 billion liras last year.