Turkey’s budget balance fell to **-214.54B** in January. This was down from **528.14B** in the previous period.
The latest figure shows a shift from a surplus to a deficit. The change between the two readings was **742.68B**.
Turkey’s budget swung sharply from a large surplus to a **-214.54 billion lira** deficit. This is a clear warning sign for fiscal discipline. It likely reflects a big jump in government spending, weaker revenues, or both. Either way, it adds strong and immediate pressure on the Turkish lira. We now expect **USD/TRY**, recently trading above **35.00**, to test new record highs.
This fiscal easing also works against the Central Bank’s effort to bring inflation down. The latest data shows inflation is still very high at **68.5% year-over-year**. Even with the policy rate holding at **45%**, higher government spending can add to price pressures. As a result, markets may start to price in the chance of another rate hike to offset this.
In the coming weeks, we should position for lira weakness by buying **USD/TRY call options**. This gives exposure to potential lira depreciation while keeping risk capped at the premium paid. The budget figures are a strong catalyst for a higher move in the currency pair.
Higher uncertainty can also push implied volatility in the lira higher. We can trade this by buying **USD/TRY option straddles**, which can profit from a large move in either direction. This is a practical way to benefit from instability without needing to pick the breakout direction.
Looking back at **2025**, the central bank’s aggressive rate hikes were starting to rebuild market credibility. This sudden fiscal expansion risks undoing that progress. The pattern also resembles earlier post-election cycles that have often ended in broader macro instability.
We should also be careful with Turkish equities and consider hedges for the **Borsa Istanbul**. Buying put options on the **BIST 100** index, or on major bank stocks, can help protect portfolios if markets fall. A higher country risk premium will likely weigh on the stock market.
here to set up a live account on VT Markets now
