Why Turks keep billions 'under the pillow'
Amid waning confidence in Turkey’s economic prospects, many Turks have come to shun the financial system and keep their savings at home.
Much to President Recep Tayyip Erdogan’s chagrin, economic woes have been a dominant issue ahead of Turkey’s June 24 presidential and parliamentary polls, with both economic actors and ordinary Turks stuck between a plummeting Turkish lira and rising interest rates.
To stop the slump of the lira, the central bank has twice raised interest rates since May, when the price of the dollar shot up to a historic high of more than 4.9 liras. Despite the two rate hikes — 4.5 percentage points in total — the dollar’s price remains above 4.7 liras, keeping the central bank under pressure for further action.
It is still unclear how effective the hikes have been in curbing the flight from the Turkish lira, but Erdogan continues to urge citizens who keep hard-currency savings “under the pillow” to return to the lira. Amid the currency’s dramatic depreciation — about 20% since the beginning of the year — many Turks have turned to hard currency to preserve the value of their savings.
During a May 26 election rally in Erzurum, Erdogan appealed to citizens “who have dollars and euros under the pillow” to “put their money in the local currency.” True to style, he referred to a foreign ploy to undermine Turkey’s economy and added, “We will thwart this game together. … We will not abandon the free market [economy] and, very soon, we will deflate the foreign exchange bubble.”
