Turkey cenbank's 11th-hour accounting shift raises questions

ANKARA, Jan 4 (Reuters) - An unusual overnight change of nearly $10 billion in the Turkish central bank's balances at the end of 2021 has prompted some economists to speculate it may be preparing to transfer funds to the national Treasury later in the year.

Ankara is ramping up fiscal support for the economy amid turmoil following a collapse in the value of the lira currency and soaring inflation. read more

Accounts published by the central bank show an adjustment of about 124 billion lira ($9.37 billion) in the valuation account, a component of the central bank's balance sheet, between Dec. 30 and Dec. 31. The account ended the year at 54 billion lira.

Another account called "other items", which includes the bank's profits, was meanwhile adjusted by around 130 billion lira ($9.78 billion), to stand at 60.2 billion lira on Dec. 31.

The central bank did not respond to a request for comment on the changes.

Economists and bankers said the changes could allow the central bank to record a profit in 2021 despite the currency crisis toward year-end. Any profits are typically transferred in April to the Treasury, the central bank's main shareholder.

The central bank "was not going to be able to transfer profits to the Treasury based on the analytic balance sheet data on Dec. 30. But on Dec. 31, a transfer of more than 100 billion lira became possible," one banker said.

The valuation account contains unrealised gains and losses arising from the revaluation of foreign currencies, gold and other assets and liabilities, based on price changes of the lira and gold on international markets.

A sharp drop in the account in 2019 prompted similar speculation that the central bank would transfer funds to state coffers, which it did.

Haluk Burumcekci, founder of Burumcekci Consulting, said such large overnight changes had not happened in the past and that there was no publicly announced forex sale on Dec. 31.

"It seems that with this operation, the central bank has closed the year with a profit and came to a position to transfer profits to the Treasury in April," he said on Twitter.

"I hope an explanation is made to the public in coming days regarding how this big change was realised," Burumcekci added.

The lira shed 44% of its value against the dollar in 2021, by far the worst performer in emerging markets. That in turn has stoked inflation which hit 36% last month, the highest under President Tayyip Erdogan's leadership.

Ankara announced a new deposit scheme last month to support the lira, under which the state covers the difference between deposit rates and exchange and gold rates for the lira converted into the new instrument.

Many economists have warned that if the lira continues to depreciate, the scheme could further stoke inflation and boost the state's fiscal burden.

($1 = 13.2857 liras)

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