The Turkish economy is grappling with a severe liquidity crunch, as evidenced by an unprecedented rise in the number of checks that were not honored by banks due to insufficient funds, the Kronos news website reported, citing the Turkish Banks Association (TBB).
The TBB said the value of checks that bounced surged to a record high of 8.1 billion Turkish lira (TL) in October alone, representing a 100 percent increase over the previous month.
This trend is not limited to October. The first 10 months of 2023 saw a 171 percent increase in bounced checks, totaling TL 44 billion.
In the seven months to July 31, the total value of bounced checks in Turkey was 21.6 billion lira ($792 million), data from Turkey’s banking association shows, according to AGBI.
That compares with 16.3 billion lira for full-year 2022 and 10.3 billion lira for 2021.
The crisis is partly attributed to the significant hike in interest rates by the Turkish Central Bank, which raised its policy rate from 8.5 percent to 35 percent in the course of a few months. This decision led to commercial loan interest rates approaching 60 percent, exacerbating the existing crisis in the market.
Companies are struggling to secure credit due to high interest rates while facing challenges from currency fluctuations.