Turkey’s central bank on Wednesday announced it had decided to provide an incentive to those who convert their gold deposits and participation funds into Turkish lira term deposit accounts.
The move is part of ongoing efforts to prop up the lira and comes over a week after President Recep Tayyip Erdoğan announced a scheme to protect lira deposits against currency volatility, in a move that reversed the recent slide and triggered a historic 50% surge in the currency’s value.
In a statement, the Central Bank of the Republic of Turkey (CBRT) said it has decided to “provide an incentive to deposit and participation fund holders in the event that they convert their gold deposits and participation funds into Turkish lira term deposit accounts.”
According to analysts, the total amount in gold accounts currently stands at TL 270 billion ($22.4 billion), while the figure for accounts with a maturity of three months is around TL 5 billion.
Erdoğan announced an incentive for savers to convert foreign exchange (forex) deposits into lira, under which the Treasury and CBRT will reimburse losses incurred due to a depreciation in lira value during the deposit period.
The lira had hit an all-time low of 18.4 to the United States dollar before Erdoğan’s announcement, amid fears of surging inflation following a series of interest rate cuts. It closed out its strongest week on record on Friday, spiking more than 50% following the government’s move to cover forex losses on certain deposits.
The CBRT has cut its policy rates by 500 basis points to 14% since September, while inflation rose to more than 21% in November. It is expected to have exceeded 30% in December, breaching the level for the first time since 2003, according to surveys.
The lira was down 2.6% on Wednesday and traded at 12.03 by 7:42 a.m. GMT.
The new forex-protected Turkish lira deposit financial vehicles will be available for people who have a lira deposit account with a maturity of three, six, nine or 12 months.
Under the facility, if the yield remains below the exchange rate, the government has pledged to pay the difference between the value of savings in lira and equivalent dollar deposits.