Worried by political, military and security risks, the Turkish people are devising their own economic and monetary survival measures. Rapid shifting to dollars from Turkish lira (TL) is a not only an expected response to continuing devaluation of Turkish currency, but also the people’s way of preserving their savings. Growing political turmoil and violence has pushed the dollar to TL 2.86, an 18% loss of value in a short period.

Monetary data released by the Banking Regulatory and Supervision Agency (BDDK) draws attention to a critical situation. BDDK says individuals and companies see the US dollar as the most robust insurance and are rapidly converting their savings to dollars. Latest figures released for August confirm that foreign currency accounts are increasing in numbers as depositors continue to convert their TL savings to dollars.

According to Banking Sector Indicators, the ratio of foreign currency deposits to overall deposits has reached 43%, the highest in the last 10 years.

One factor that’s encouraging the shift to US dollars is the limited capacity of the Central Bank to adjust interest rates. The vitriolic debate that raged between the Central Bank and President Recep Tayyip Erdogan over interest rates was dissipated by the dollarization of the economy. Erdogan was a fervent proponent of low interest rates to invigorate the economy and was a harsh critic of any move to increase the interest rates, even minimally.