Turkey will expand its efforts to attract savers to the lira next week with a plan to bring billions of dollars of gold ‘under the mattress’ into the banking system, the country’s finance minister has told investors during a talk. a visit to London.
Nureddin Nebati, who this week made his first trip to the UK since being appointed late last year, said the government hoped that 10% of the estimated $250 billion in gold held by the Turks in their homes would be converted to Read as part of the initiative, according to two event attendees.
Nebati said 30,000 gold shops would play a central role in the program, which will build on a broader set of emergency measures unveiled in December to halt a free fall in the lira, which lost 44 % of its value against the dollar in 2021.
The government has signed contracts with five gold refineries to convert jewelry handed over under the program into gold bars that would contribute to the country’s central bank reserves, he added.
The finance ministry declined to comment on the plan, but Turkey’s Anadolu news agency quoted Nebati as saying that new measures would soon be announced to put “under the mattress gold in the [financial] system”.
A traditional gift given for weddings and births, gold has long been a favored way for Turks wary of the banking system — and their country’s history of inflation — to protect their wealth. But Turkish officials view it as part of a larger issue of “dollarization,” or inflows into foreign currency and precious metals, which has been a persistent source of pressure on the Turkish lira.
While the new deposit schemes have had some success, attracting around $23 billion in total, analysts doubt they will provide a lasting solution to distrust of the lira. Turkey has negative real interest rates of almost 35% once Turkey’s inflation rate of 48.7% in January is taken into account.
An investor who attended one of Nebati’s group meetings said the long-standing Turkish distrust of the pound would be difficult to overcome. “Maybe if they pay a really good interest rate, they can get [interest],” he said. “But I doubt they’ll get $25 billion.”
Nebati, who was appointed in December after his predecessor resigned, struck an optimistic tone at a series of meetings in London aimed at winning back foreign investors who have shunned Turkish stocks and bonds in recent years.
He defended President Recep Tayyip Erdogan’s controversial policy of keeping interest rates well below inflation, predicting that inflation would drop sharply at the end of this year.
Still, attendees told the Financial Times that Nebati seemed confident and well-informed, especially when compared with Berat Albayrak, a former finance minister and Erdogan’s son-in-law who had a strained relationship with the foreign investment community.
“This guy had a pitch. He had prepared,” said Tim Ash, emerging markets strategist at BlueBay Asset Management. “The message was clear: foreign capital is welcome. Forget capital controls, we’re not going to do that. It’s encouraging.
Others warned, however, that the government’s efforts to keep the lira stable through micromanagement tools such as the depository system, rather than orthodox economics, would eventually backfire.
“The determinant of currency valuation is the interest rate,” said another participant. “Dedollarization by administrative means is impossible. Maybe they can keep it running for a year, but after that it will explode.