Turkey on Tuesday introduced new amendments in the scheme that protects local currency savings against exchange rate volatility.
According to a decree published in the Official Gazette, the country’s central bank will determine the maximum interest rate charged by banks on foreign currency and gold deposit accounts converted to Turkish lira under the scheme.
The program, announced by President Recep Tayyip Erdoğan last month, aims to encourage foreign currency holders to convert their funds to lira and keep their savings in Turkish money.
Under the “exchange rate-protected deposit" system, the government guarantees it will cover losses should the interest they receive when the account matures be less than what they would have earned by keeping the savings in foreign currency.
The scheme was unveiled after the lira fell to a record low of 18.4 to the United States dollar on Dec. 20, before rallying sharply to just over 10 and then settling at current levels just under 14 to the U.S. currency.
Erdoğan maintains that the lira deposit system is a success.
“We are pleased with the trust our citizens have shown in the exchange rate-protected deposits. We are pleased with the decrease in volatility in exchange rates and continued stability,” he said last month.
Since the announcement, the government extended the program to corporate accounts. The Central Bank of the Republic of Turkey (CBRT) also said exporters would be required to exchange 25% of their foreign currency revenue into lira.
The volatility in the lira came after the CBRT slashed its benchmark interest rate by 500 basis points to 14% from 19% since September. It halted the easing cycle and held its policy rate steady last month.
Separately, the central bank also announced on Tuesday it will issue rules allowing Turks resident abroad to convert their foreign currency accounts into special lira accounts with returns linked to the value of foreign currency.
