Turkey’s Central Bank announced late on Dec. 21 that it has decided to support foreign currency deposit accounts converted to lira deposit accounts to encourage reverse dollarization.
“In the event that resident natural persons, who already had a foreign currency deposit account (…) convert their accounts into Turkish Lira term deposit accounts, will be eligible to benefit from the incentive,” said the Central Bank.
In a statement, the Central Bank also said it would cover the difference after calculating the interest rate and exchange rate difference on opening and closing the lira deposit accounts. The owner of the account will be paid whichever is greater, he said.
Accounts converted to lira deposit accounts can have maturities of three, six or 12 months, the bank said.
The Turkish lira, which has hit a series of record lows in recent days, exploded in volatile trading on Dec. 21 after Turkish President Recep Tayyip Erdoğan proposed measures to protect local currency savings from such swings.
More than half of residents’ savings are in foreign currencies and gold, according to Central Bank data, due to a loss of confidence in the pound after years of depreciation.
The currency has plunged to record highs this year amid fears of an inflationary spiral sparked by Erdoğan’s push for monetary easing. At its lowest, it was down about 60% on the year.
Under pressure from Erdoğan, the Central Bank has cut rates by 500 basis points since September. The president has pledged to continue with his low-rates policy.