Turkey has included companies’ currency and gold deposit accounts converted to Turkish lira in a program that protects local currency savings against exchange rate volatility, the Official Gazette said on Tuesday.
Dollars, euros, pounds or gold in companies’ deposit accounts at the end of 2021 could be converted to lira deposits with a maturity of six months to one year to be included in the scheme, the Gazette said.
The program, announced in December, encourages savers to convert their deposits into foreign currency and support the lire. It covers the difference if the variation in the exchange rate applicable at the end of the term is greater than the sum of the principal and the yield.
The program to protect the pound’s deposits from currency volatility followed the fall of the pound after the country’s central bank cut its policy rate by 500 basis points to 14% from 19% since September. It will hold its next rate-setting meeting on January 20.
The lira fell to a record high of 18.4 against the US dollar in December before rebounding strongly last week after President Recep Tayyip Erdoğan announced the initiative.
The program effectively ties the value of new special deposits to the dollar by promising to offset losses incurred as a result of exchange rate fluctuations.
The initiative had reversed the fluctuations of the pound and triggered a historic 50% increase in the value of the currency during the week to December 24.
The volume of forex-protected deposits under this program has increased to TL 91.5 billion, Treasury and Finance Minister Nureddin Nebati said last week.
Constant and virulent opponent of high interest rates, Erdoğan has supported an economic model based on lower borrowing costs, which he believes will boost production, investment, employment and, ultimately, growth. .
The government, regulators and banking associations have all adopted the new policy direction.