The Turkish lira continued its rally and rose by nearly 10% on Thursday, adding to large gains this week, after President Recep Tayyip Erdogan said the government and central bank would provide guarantees to some local currency deposits in exchange for foreign exchange losses.
The lira recorded 10.81 against the dollar, up from the closing level in the past weeks, to stabilize after record fluctuations. The lira hit an all-time low of 18.4 against the dollar a day before it changed course and climbed after the rescue plan was announced.
Erdogan took a series of steps to ease the burden of the declining currency and put it on the treasury, urging the Turks to stick to the possession of the lira instead of the dollar.
Official data revealed that more than half of local deposits are in foreign exchange and gold, due to the lack of confidence in the lira after years of its devaluation and the decline in the credibility of the central bank.
The Turkish president said that the new economic plan to adjust currency exchange rates in a way that suits the country's economic reality has achieved its goal. He also stressed his rejection of the opposition's demand for early elections.
During his participation in the meeting of the Parliamentary Bloc of the Justice and Development Party in the Turkish Parliament, Erdogan stressed that his government is determined to protect citizens' gains from inflation pressures and exchange rate fluctuations.
"All citizens will be winners in the new economic plan, not just those who have deposits in banks," he added.
The new Turkish financial instrument:
It allows depositors to realize the same level of potential profits as savings in foreign currencies by keeping assets in Turkish Lira.
The “Turkish lira deposit protected from exchange rate fluctuations” mechanism ensures that the lira depositor does not fall victim to fluctuations in exchange rates, and obtain the declared interest, in addition to the difference in the dollar price between the time of deposit and withdrawal.
At the end of the date of withdrawing the deposit, if the profits of depositors in banks in pounds are greater than the increase in the exchange rate, they will maintain their profits, but if the exchange rate profits are greater, then the difference will be paid to the citizen, while exempting him from taxes, according to the Ministry of Treasury and Finance.
Deposit accounts can be opened with terms of 3, 6, 9 and 12 months, and the minimum interest rate announced by the Central Bank of Turkey can be applied.
In the event that the deposit amount is withdrawn before the maturity date, the deposit account will be converted into a checking account and the right to receive interest will be cancelled.