Türkiye's de-dollarization advances as lira deposits hit 11-year high

ANKARA, Treasury and Finance Minister Mehmet Şimşek announced that Turkey’s efforts to reduce reliance on the US dollar, known as de-dollarization, have gained substantial momentum. According to data published by the Central Bank of the Republic of Türkiye, the proportion of Turkish lira deposits among total bank deposits reached 62 percent, marking the highest level in over 11 years. This figure reflects a notable increase from approximately 31.6 percent in August 2023, indicating a steady shift in investor behavior toward local currency assets. Şimşek highlighted that this progress was driven by enhanced policy predictability and growing investor confidence. In a recent post on his social media account, he emphasized that despite facing several economic shocks, the country has managed to maintain a strong position in favor of the lira. He reiterated the government’s commitment to continuing its policies aimed at reinforcing trust in the Turkish currency, bolstering macroeconomic stability, and achieving price stability, a key factor for long-term economic growth. The latest figures from the Central Bank show that total bank deposits in the country dropped slightly by 0.82 percent to 31.37 trillion Turkish lira ($670 billion) during the week ending July 3. Among these, lira-denominated deposits decreased by 2.4 percent to 17.10 trillion Turkish lira, while foreign currency deposits saw a marginal rise of 0.02 percent to 10.13 trillion Turkish lira. These numbers reveal a continued preference for holding assets in the local currency, even amid global financial uncertainties. The Central Bank also reported that total foreign currency deposits amounted to $256.9 billion, with $217.7 billion held by domestic residents. When adjusted for exchange rate fluctuations, the amount of foreign currency held by domestic residents decreased by $3.25 billion during the week. This suggests a gradual but consistent movement away from foreign currency holdings, aligning with broader de-dollarization goals. Separate data from the Central Bank revealed that gross international reserves increased by $10.49 billion to reach $159.69 billion. This growth was fueled by increases in both foreign exchange reserves and gold reserves. Specifically, gross foreign exchange reserves rose by $7.70 billion to $61.95 billion, while gold reserves grew by $2.79 billion to $97.74 billion. These developments underscore the central bank’s strategy to diversify and stabilize the country’s external reserves, further supporting the de-dollarization initiative. In addition to these financial indicators, the government continues to implement measures designed to enhance the attractiveness of the Turkish lira as a store of value. Policies focused on improving transparency, reducing inflation expectations, and fostering a more stable economic environment are being prioritized. These actions aim to create a favorable climate for both domestic and international investors, reinforcing the lira’s role in the global financial system. Looking ahead, officials expect that sustained policy consistency and improved macroeconomic conditions will contribute to further strengthening the position of the Turkish lira. With ongoing efforts to promote local currency usage and manage external imbalances, the trajectory of de-dollarization appears to be gaining traction. As the economy navigates through evolving global dynamics, the focus remains on maintaining financial resilience and ensuring long-term economic sustainability.