President Recep Tayyip Erdogan has urged Turks to sell foreign currency for liras to improve the chances of success of a new bank deposit scheme linked to the dollar.
Deposit holders have deposited 163 billion lira ($12.1 billion) in new accounts designed to protect depositors from the depreciation of the lira, Erdogan said after a cabinet meeting. The flows increased from the 131 billion lira announced by the country's finance minister on Friday.
Turkey introduced a new deposit scheme on December 20 after the lira fell to a record low against the dollar. The currency lost 44 percent of its value last year but stabilized in January, losing 1.4 percent.
Turkish state banks are putting pressure on their customers to sell foreign currency and place capital in new lira accounts, Reuters reported.
The lira's losses against the dollar triggered inflation, which accelerated to an annualized 36.1 percent in December, the highest level since 2002.
According to data released on January 7 by the industry supervision agency, the 163 billion lira in new deposit accounts constitutes about 3 percent of the total 5.42 trillion lira deposits in Turkey's banking system. Deposits in foreign currencies of 3.51 trillion liras account for 65 percent of this amount.
State banks have imposed efficiency criteria to force their employees to convince customers to convert their foreign currencies into liras.
One private export sector told Reuters bankers who visited him tried hard to sell the program even though he explained it was not a right fit for a business that pays for raw materials and earns income in foreign currencies.
Most of the capital placed in the deposit program comes from existing lira accounts. Finance and Treasury Minister Nureddin Nebati said last week that about 15 percent of inflows came from foreign currency accounts.
Turkey's central bank is also forcing exporters to convert their income into lira. Earlier this month, the bank introduced rules requiring companies to exchange 25 percent of their income in foreign currencies into lira.
The lira was trading down 0.8 percent to $13.51 per dollar at 10:53 a.m. local time Thursday.
International financial institutions, including Bank of America, warned this week that the deposit scheme could be financially unsustainable if the lira continues its sharp decline. Britain's Standard Chartered bank said it expects the lira to weaken to 20 per dollar by the end of the year.