Free Trial

Fiscal Risks Emanate from FX-Linked Deposit Scheme

TURKEY
  • TRY weakness and rise in yields brings forward the spectre of Erdogan’s FX-linked deposit scheme having negative fiscal impact on Turkey with government backstopping FX-induced losses on deposits
  • Reminder: If lira depreciation exceeds TRY interest rate, the Treasury will give the difference to the depositor in lira. There will be no withholding tax on these deposits.
  • These measures – especially the support provided to TRY deposit holders – could potentially create a significant burden on the Treasury.
  • JPM’s back-of-the-envelope calculation showed that any extra 12% lira depreciation over the lira interest rate could increase the budget deficit by around 1% of GDP over a six month horizon.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.