Turkey’s Central Bank Chief Draws a Line Against Dollarization

Central Bank of Turkey (TCMB) Governor Fatih Karahan delivered a pointed message this week on two of the most stubborn problems in the Turkish economy: the low savings rate and the persistent habit of households and businesses holding foreign currency instead of Turkish lira. Speaking at a public event, Karahan signaled that the bank's policy stance remains firmly aimed at reversing both trends.

The dollarization problem is not new — Turks have been converting savings into dollars and euros for decades as a hedge against inflation and currency risk. But the scale matters now more than ever. When a large share of deposits sit in foreign currency, the central bank loses a critical lever of monetary control. Every rate decision becomes less effective when the transmission mechanism — the channel from policy rate to real economy — is clogged by FX-denominated assets.

Karahan's remarks suggest the TCMB is not done tightening the screws on this front. The message to savers is clear: keep your money in lira, earn real positive returns, and trust the process. Whether households actually follow through depends on one thing — whether inflation continues its descent and the lira holds its ground. Right now, those two conditions are fragile but present.

Levent KAYIRA Commentary: Ekonomik Gündem Analysis: Let's put real numbers on this. At the peak of the dollarization crisis in 2021-2022, FX and FX-protected deposits (KKM) accounted for nearly 70% of total household deposits. That number has come down, but FX deposits still represent roughly 45-48% of the system — far above the levels seen in the 2000s when Turkey was building its post-crisis credibility.

For every 1 percentage point shift from FX to lira deposits, Turkish banks gain roughly 10-15 billion lira in domestic funding capacity. Multiply that by 20 points of potential de-dollarization and you start to see why this is a banking sector story, not just a macro talking point. Lira funding is cheaper, more stable, and gives banks room to price loans more competitively.

From my years at Kocbank and Garanti, I can tell you that corporate treasurers watch the governor's tone very carefully. When the central bank sounds confident and consistent, FX hedging behavior shifts. Karahan has been consistent — that's actually his biggest asset right now.

For small business owners and individual savers: if inflation drops below 40% by year-end as the bank projects, lira time deposits at 45-50% are still printing real positive returns. That window won't stay open forever.

Kaynak: Google News Ekonomi