The jury is still out on Ankara’s scheme to encourage a return to the Turkish lira as hard-currency depositors are sticking to their assets despite a state-backed market intervention that rallied the lira last week.

The scheme, meant to reverse an alarming dollarization trend, was announced by President Recep Tayyip Erdogan on Dec. 20, shortly after the lira tumbled past 18 versus the greenback. It was an all-time low, to which the embattled currency sank from the region of 11 vs. the dollar in just a month amid growing apprehension over Erdogan’s push for interest rate cuts despite soaring inflation. Officials may claim that the scheme has sparked a return to the lira, but financial data indicate the opposite.

According to daily statistics by the Banking Regulation and Supervision Agency, foreign-currency deposits not only did not decrease after the government’s move but rose by about $250 million to reach $163.7 billion Dec. 22. Similarly, corporate foreign-currency deposits increased by $1.8 billion to $98 billion in the same period. 

The scheme aims to encourage foreign-currency depositors to return to the lira and prevent the flight of the remaining lira holders, pledging that any losses they might incur from the fall of the lira would be reimbursed by the treasury or the central bank. But despite all-out promotion by state institutions, public banks and the pro-government media, hard-currency depositors have shown little interest so far, mainly because of lingering mistrust in Ankara. The confidence gap has been compounded by revelations about how the lira’s abrupt rally occurred — through back-door interventions by the central bank, which sold billions of dollars via public banks despite its already depleted foreign reserves.