IABAN – Turks rush to change TL into foreign currency amid growing fears

Turks rush to change TL into foreign currency amid growing fearsIn the wake of a weakened lira that recently plunged to record lows before gradually improving Turks are rushing to hold their savings in foreign currency, which now make up 64 percent of bank deposits, Izmir Gediz University economy professor Emre zsz has said.andldquoInflation is under 10 percent, but people are not keeping their savings in lira, but in foreign currencies.

The main reason for this is the lack of institutional trust. People arenand#39t sure whether or not inflation will jump up from 9 percent to around 30 percent again, and are converting their savings just in case,andrdquo said zsz, speaking to Todayand#39s ZamanandldquoThose in Turkey with savings are converting it to dollars, euros or other foreign currencies.

Banks are using these deposits for the extension of other loans and thereby decreasing the currency risk. However the lira instantly loses value, and this reduces the ability of loan holders to make payments, which creates non-performing loans.

This creates a risk for banks and is bad for those with loans, but it does not affect those with savings deposits,andrdquo said zsz.The lira fell to record lows earlier this month, plummeting to 241 to the dollar amid domestic turmoil and plunging oil prices resulting in the strong devaluation of the Russian ruble.

The ratio of savings to gross domestic product (GDP) is relatively low in Turkey, where consumer debt has skyrocketed in recent years and a high percentage of people claim they do not earn enough money to set aside savings.

SOURCE: Today’s Zaman