Skip to main content

Turkey’s 'covert' interest payments on course to exceed regular ones

The cost of state safeguards in a deposit scheme meant to curb dollarization in Turkey has ballooned to alarming levels as the Turkish lira continues to tumble.
US dollar banknotes and Turkish lira banknotes, photo taken in Istanbul, Turkey, Dec. 7, 2021.
Read in 

The compensations — or “covert” interest — that Ankara pays to depositors under a scheme to curb dollarization in Turkey are on course to balloon beyond its interest payments, while the battered Turkish lira has already fallen back close to its record low in December, when the scheme was introduced.

The so-called FX-protected deposits were launched as part of emergency measures that President Recep Tayyip Erdogan announced shortly after the lira sank to an all-time low of 18.4 against the dollar on Dec. 20, driven down by unorthodox rate cuts by the central bank at Erdogan’s behest. Under the scheme, the treasury and the central bank make up for any losses that lira depositors incur from the currency’s depreciation. Despite its initial rebound to the region of 11 versus the dollar after the announcement of the scheme, the lira has since plummeted anew, trading at about 18.1 against the greenback on Aug. 22.

Access the Middle East news and analysis you can trust

Join our community of Middle East readers to experience all of Al-Monitor, including 24/7 news, analyses, memos, reports and newsletters.


Only $100 per year.