Turkish President Recep Tayyip Erdoğan has become angered after a deposit scheme linking the lira to the dollar failed to reduce foreign currency holdings in the country, said Barış Soydan, a columnist for Halk TV.
“The president is angry. Let’s do whatever it takes urgently to get this product to work,” one senior official in the economic administration said, according to Soydan.
The government has allegedly discussed possible changes to the components of the mechanism, including the maturity of deposits and the interest margin, he said.
Erdoğan announced the new mechanism on Dec. 20 after the lira sank to successive record lows against the dollar. While the currency rallied strongly from an all-time low of 18.36 per dollar in the week that followed, it has declined for six of the last seven trading days. The lira was trading up 0.3 percent at 13.29 per dollar on Wednesday morning local time.
A small increase in the new dollar-linked deposits reported by the government is the result of Turks transferring their money from traditional lira deposits, rather than from foreign exchange savings, Soydan said.
Companies increased their holdings of foreign currency by $1.6 billion in the week to Dec. 24, taking advantage of the lira’s rally, while retail clients reduced theirs by just over $100 million, according to official data. Foreign currency deposits rose to a record $239 billion.
The deposit mechanism offers a minimum annual interest rate of 14 percent, and provides additional income linked to the lira’s value against the dollar should the lira lose more than that amount. People are required to invest the money for a minimum of three months, and they lose all rights to profits should they withdraw their capital early.
Preliminary data shows that Turks have invested 84.05 billion liras ($6.33 billion) in the new dollar-linked deposits, Treasury and Finance Minister Nureddin Nebati said this week. That is equal to around 1.7 percent of Turkey’s total bank deposits of 4.87 trillion liras reported by the banking watchdog for Dec. 24. It equates to about 4.5 percent of the 1.85 trillion liras invested in lira-denominated deposits.
Soydan said trouble could also be brewing for the government due to its management of the country’s statistics office. Some former employees of the Turkish Statistical Institute (TÜİK) who retired due to mobbing are in touch with the political opposition in Turkey and are likely to file a lawsuit, he said.
Some analysts and political commentators suspect TÜİK of manipulating economic data including inflation under government pressure. Erdoğan has replaced dozens of senior employees of the organisation via presidential decree over the past three years.
“Do mobbing cases illuminate what has happened in the background of inflation data in the past years? Let’s wait and see,” Soydan said.
Turkey’s consumer price inflation rate surged to 36.1 percent in December, the highest level since 2002, from 21.3 percent the previous month, TÜİK said on Monday.