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Prof. Şahap Kavcıoğlu
Governor
In 2022, the Central Bank of the Republic of Türkiye (CBRT) introduced a comprehensive policy framework prioritizing the Turkish lira in all its policy tools to reshape price stability on a sustainable basis. As an essential element of this policy framework, the Liraization Strategy was also made public in 2022.
The Liraization Strategy was developed with a holistic approach that is centered around the use of the Turkish lira. Instead of a short-term perspective, the main objective of this strategy is to help the Turkish economy improve its supply and current account surplus capacity as well as achieve lasting price stability by boosting production, investments and value added.
Global inflation hit record-high levels in 2022 due to developments in energy and commodity prices, and other negative supply shocks. In this environment, the interest rate policy implemented as part of the Liraization Strategy aimed to provide favorable financing costs that would help maintain domestic supply capacity and consistently increase export capacity for a sustainable current account balance. Targeted loan utilization constituted another important pillar of the monetary policy in 2022. The CBRT devised and pioneered policies that would encourage efficient use of loans under the targeted loan framework to support investments, employment, production, and exports.
The CBRT judged that in addition to the prerequisite of a structural current account surplus, another prerequisite for establishing a foundation for lasting price stability and sustainable growth in the Turkish economy was to permanently increase the weight of the Turkish lira on both assets and liabilities sides of the balance sheets of households, companies and banks via liraization. Accordingly, macroprudential measures and the FX-Protected Deposit (KKM) schemes were employed.
In 2022, the CBRT conducted an effective reserve management to strengthen international reserves. In this period, reserve sources were diversified through new tools developed as part of the Liraization Strategy whereby international reserves increased and exchange rates stabilized. In this scope, in 2022, the CBRT launched the Deposit and Participation Scheme for Non-Resident Turkish Citizens (YUVAM), which covers Turkish lira accounts and encourages non-resident persons and their companies abroad to bring their savings to banks in Türkiye. In addition, the practice of Bringing Gold-Denominated Physical Assets into the Financial System was introduced to enable conversion of physical gold assets of resident real and legal persons into Turkish lira deposit and participation accounts.
Starting from December 2022, the Liraization Strategy has produced positive results in terms of the objective to achieve price stability in the short and long run, and the process of a gradual decline in inflation started. Meanwhile, the monetary policy framework in place was one of the drivers of the strong performance in economic activity in 2022. Our country posted a higher rate of growth than both advanced and emerging economies in 2022 while exports reached record-high levels and employment increased significantly compared to other countries.
Foreign trade and the current account balance are projected to be more favorable in 2023 on the back of the realization of large-scale investments and the normalization in energy prices. Accordingly, a permanent decline is expected in inflation with the contribution of the Liraization Strategy and the measures taken in coordination with the stakeholders of the economy.
In 2022, the CBRT also took important steps in the financial innovation arena. The first payment transactions on the Digital Turkish Lira Network were executed successfully. Also, work was initiated to expand the Digital Turkish Lira Collaboration Platform to involve selected banks and financial technology companies in 2023.
The CBRT continued to monitor the developments concerning climate change, which has been among the top priorities of the global agenda in recent years, as well as their impact on the economy and the financial system, and to collaborate with national and international stakeholders on this issue.
In this challenging past year, our Bank lost a valuable colleague. Prof. Yusuf Tuna, our Monetary Policy Committee member, who passed away in October, was one of our country’s most skilled academics in his field. During his term of office at the Monetary Policy Committee where we worked together, he made significant contributions to the Committee with his vast knowledge and experience. I would like to commemorate him once again and wish God’s mercy upon him.
Proud to reach the centennial of our Republic and aware of its responsibility, the CBRT will work hard at the Istanbul Financial Center, the construction of which will be completed in 2023, focusing on achieving permanent success and sustainability in all aspects of price stability and financial stability, particularly in monetary policy. We will decisively use all available instruments under the Liraization Strategy, our integrated policy framework, and also continue to safeguard financial stability as a supporting factor for permanent price stability. We will also contribute with full force to the efforts to heal the wounds of the earthquakes that occurred in February 2023, and help our country to move on stronger than before.
