10000000 Lira – Turkey

The Turkish currency crisis of 2001 was a profound economic and political collapse, marking the most severe in a series of destabilizing events that began in late 1999. The context was a discredited crawling-peg exchange rate regime, adopted as part of an IMF-backed stabilization program to curb hyperinflation. This rigid system, combined with chronic fiscal deficits, a fragile and over-regulated banking sector laden with non-performing loans, and severe political uncertainty, created an economy acutely vulnerable to investor panic. The immediate trigger came in February 2001 during a heated public dispute between President Ahmet Necdet Sezer and Prime Minister Bülent Ecevit, which shattered market confidence in the government's ability to manage the economy.

The crisis unfolded with a sudden, massive flight of capital, forcing the Central Bank to spend billions of dollars in a futile defense of the Turkish lira. Within days, overnight interest rates skyrocketed to over 7,000%, and the lira lost nearly 40% of its value against the U.S. dollar. The banking system, which had borrowed heavily in foreign currency, was pushed to the brink of insolvency. The social impact was immediate and severe, with a sharp contraction in GDP, soaring unemployment, and a dramatic decline in living standards for millions of Turks.

In response, the government let the lira float freely and appointed Kemal Derviş as Minister of Economy, who orchestrated a radical new recovery program with strong IMF support. This program focused on aggressive banking sector restructuring, greater central bank independence, and a shift to inflation targeting. The 2001 crisis proved to be a pivotal turning point, leading to painful but foundational reforms that, despite subsequent challenges, established a more market-oriented framework for the Turkish economy in the following decade.