In a significant move aimed at bolstering the lira, Turkiye has increased the cost for banks to provide short-term deposits, a policy change that forms part of a $124 billion government-backed lira savings program. The new regulation was issued by the central bank and published in the Official Gazette on Thursday.
Under this new rule, lenders are required to hold larger reserves for accounts with durations of up to six months. This measure is designed to shield lira deposits from devaluation against stronger currencies. It’s part of an effort by the Turkish government to absorb billions in liquidity and dissuade individuals from converting their assets into dollars.
This tightening of monetary policy is expected to have broad implications, as it aims to stabilize the national currency by reducing its supply in the market. By making it more expensive for banks to provide short-term deposits,the move is designed to encourage longer-term investments in the lira and discourage short-term speculation.
The policy change is one of several steps taken by Turkiye in recent times to strengthen its economy and protect its currency. The $124 billion government-backed lira savings program is a significant initiative in this regard, aimed at promoting savings in the local currency and reducing reliance on foreign currencies.