Turkey’s President Recep Tayyip Erdogan unveiled an emergency plan to curb the lira’s unprecedented depreciation and protect investors against wild swings in the currency. One measure guarantees that returns on lira-denominated deposits wouldn’t fall short of bank interest rates, in an effort to end current spot demand for foreign exchange.
The Treasury will make up for losses incurred by holders of lira deposits should the lira’s declines against hard currencies exceed bank interest rates. For example, if banks pay 15% for one-year lira deposits but the currency depreciates 20% against the dollar in the same period, the Treasury -- that is, taxpayers -- would pay deposit-holders the differential. The instrument will apply for individuals holding lira deposit accounts with maturities between three to 12 months. The minimum interest rate will be the central bank’s benchmark rate and no withholding tax will be implemented.