According to the statement made by the Ministry of Treasury and Finance, a total of 591 billion liras has been reached in Turkey's foreign currency-protected bank accounts. According to the ministry statement;

Accounts contributed to confidence in the currency.

The share of foreign currency in bank deposits has dropped by more than 10 points since the accounts were opened in March.

The stability created by the accounts limits the volatility caused by the Russia-Ukraine war and the Fed's rate hike.

In our current economy practice, FX-linked deposit is the only tool used to reduce the pressure on the depreciation of the TRY, so the attractiveness of the system needs to be maintained at this stage in terms of operability. Within the framework of the size reached, there is of course a certain amount of burden on the Treasury from the current exchange rate levels over the estimated average exchange rate break-even point. When we consider the TRY account opening announced by the Treasury today and the account breakdown converted into foreign currency, an estimated 12.5 billion TRY public finance burden is assumed. Although it is not a burden that the Treasury cannot convert in its current state, as long as the currency goes up and the system rotates itself and the exchange rate does not stabilize, the cost it will impose on the Treasury will of course increase.

If there is no reinvestment in FX-linked deposit at the maturity date and depositors and legal entities convert their money back into dollars, the exchange rate shock effects may become active. Since the FX-linked product is centralized in the management of price stability, regulations may continue to come in a way that will make the system attractive and support new entries so that this does not happen. Elements such as interest rates and tax exemption are the first ones that come to mind, and lowering the minimum maturity may be considered in the future.

Currency conversion and direct TRY based FX-linked deposit, of course, have perspective differences. If you have TRY and open FX-linked deposit, you buy an option against the currency movement and if the option does not hold, you do not use it logically. If there is no increase in foreign currency, you will earn a return equal to the TRY interest. In YUVAM accounts opened abroad, the value of TRY relative to the interest rate is important in order to have a net return. The foreign currency interest that the foreigner will receive on his foreign currency deposits abroad is quite low, even negative. When the saver converts from foreign currency to TRY product, he will receive TRY interest. Even if TRY loses value every period, if the return is met, in fact, its currency in foreign currency remains constant. If the foreign currency does not rise, the saver will receive TRY interest from the amount that converted from foreign currency to TRY product and have a chance to convert it back into foreign currency.

Since we are a country with a current account deficit, and considering the private sector's need for foreign currency in terms of both foreign exchange indebtedness and goods purchase, the obligation to hold a certain amount of foreign currency will limit new entries to the system after a while. In the current situation, we will not have turned into an economy with a current account surplus this year due to increased commodity prices in the world due to war risks and export and tourism revenues that will probably be suppressed. This reveals the continuation of the net foreign exchange outflow and the necessity of financing it.

 

Kaynak: Tera Yatırım
Hibya Haber Ajansı