When a home sale takes place at a bank branch in Turkey, bank staff have to spend the whole day counting banknotes with counting machines, Omer Mert, general manager of small-cap Fibabanka, told BloombergHT during a televised interview on October 22.

“And ATM machines are broken due to counting out money,” observed Mert, relating difficulties that have been caused by the severe depreciation of the Turkish lira over the years that has shrunken the value of the various available banknotes.

“We can't install some banknotes in the machines anymore,” continued Mert. “We ask customers to use ATMs due to the workload caused by counting out banknotes at branches. Additional workload for the machines is created and problems follow.”

Mert also said that new, larger banknote denominations are not likely to be printed in the near future as introducing new regulations and legislation is a long process.

“There is a 100% need for bigger banknotes,” he said.

In 2021, the nominal value of Turkish lira coins even fell below their scrap value. In 2023, Turkey’s state mint reduced the weight of the coins and Turks complained that automats would not accept the new coins.

Lost control

In August 2018, the Erdogan regime lost its grip on the country’s economy. The USD/TRY rate, entering the 34s, was higher by about 700% in August this year compared to August 2018, when it was in the 4s. The cumulative inflation in the country follows a parallel path.

Chart: USD/TRY.

 

Two months ago, central bank governor Fatih Karahan, a member of Turkey’s new “orthodox” economy team appointed in July 2023, was once again asked whether 500-lira and 1,000-lira banknotes would be printed.

He said that he would choose to skip this question since he replied to it in his previous Q&A session with the press.

In the previous press meeting, he said that there were some formulas to determine the necessity of new banknotes, but he did not specify the formulas he had in mind.

As of September, 80% of the banknotes in circulation were 200-lira, the largest available banknote, due to the hyperinflation seen in Turkey across recent years.

When Erdogan hailed cutting of toilet fee from million lira to one

Turkey’s president, Recep Tayyip Erdogan, does not allow the release of bigger banknotes. Across the 1990s, Turkey used million-lira banknotes and Erdogan is proud of how he dropped six zeroes in a currency rehash in 2006.

Video: Erdogan: “We cut the public toilet fee from one million lira to one lira”.

Hyperinflation ails the nation

On October 3,  the Turkish Statistical Institute (TUIK, or TurkStat) said that Turkey’s consumer price index (CPI) inflation officially stood at 49% y/y in September versus 52% y/y in August.

The Istanbul-based ENAG inflation research group of economists, meanwhile, calculated a Turkish inflation figure of 89% y/y for September. 

If the domestic producer price index (PPI) is recorded as up more than 100% compared to its level three years ago and up more than 10% across the last year, local corporates are obliged to apply hyperinflationary accounting rules in accordance with IAS 29 standards.

In 2022, the government again delayed the implementation  of the rules for local companies to end-2023.

The rules were introduced to be applied as of January 1, 2024, but financial corporations were exempted.

In January, the banking watchdog BDDK said that the rules would be applied for banks, leasing companies, factoring companies and asset management companies as of January 1, 2025.

In March, the insurance watchdog SEDDK said that Turkey’s insurance industry would be obliged to apply hyperinflationary accounting rules as of January 1, 2025.

In April, the finance ministry said that the rules would not be applied for the first quarter.

In August, the finance ministry said that small companies, which have an annual turnover of less than TRY 50mn ($2mn), will also not apply the rules in Q2 and Q3.