Turkiye unveils scheme to bring gold savings at home into banking system

ANKARA

Turkiye Saturday announced a new plan to encourage people to bring their “under-the-mattress” gold into the banking system.

Under a tradition of turning to gold to safeguard wealth by storing it at home, Turkiye's government estimates the presence of around 5,000 tons of gold savings at home worth $250-350 billion.

Touting the plan in Istanbul, Treasury and Finance Minister Nureddin Nebati told reporters that gold conversion bank accounts offer the public risk-free incomes.

People can safely and easily move their gold holdings to the financial system through jewelers and banks, with 10,000 jewelers joining the effort by the end of this year, he added.

The gold put into the financial system under the new plan can be taken back if requested, he also said.

"Turkiye's Istanbul Clearing, Settlement and Custody Bank (Takasbank), Borsa Istanbul, and the mint will develop cooperation with banks to bring gold into the economy," Nebati said, adding this will strengthen the country's economy and reduce pressure on the financial system.

Participation and public banks will be the most important tools in this process, he said.

Nebati also said the value of FX-protected liras deposit and participation accounts, a policy put into practice last December, has now approached 340 billion liras (about $25 billion)

The government aims to implement models that bring savings into the financial system with a holistic approach, to develop domestic savings instead of foreign savings in financing growth, to direct domestic savings to effective and efficient investments, and to increase the attractiveness of lira savings.

Turkiye's President Recep Tayyip Erdogan previously urged the public to convert their gold holdings to Turkish lira through new financial instruments introduced to shore up the currency.

He said both companies and the public would accelerate the return to the Turkish lira at the beginning of 2022.

Government cuts VAT on basic food products

Joining the announcement via live video, Erdogan said: "Under our VAT System Simplification Program, we’re cutting the VAT (value-added tax) on basic food products from 8% to 1%."

The cut includes staples such as flour, rice, pasta, meat, fish, tea, coffee, water, milk and dairy products, cheese, eggs, oils, sugar, fruits, vegetables, nuts, and legumes.

"Fighting inflation requires a total determination, belief, and sacrifice," Erdogan underlined, saying that the government is taking the steps it pledged towards this end.

The new move amounts to a 7% discount on food products, he said.

Saying that products with their VAT reduced to 1% will have a significant weight in the inflation basket, Erdogan said the tax reduction also means an important gain in the fight against inflation.

Turkiye saw a 48.69% annual hike in consumer prices in January.

The country's Central Bank revised its year-end inflation forecast upwards for both 2022 and 2023 while keeping its medium-term target at 5%.

Annual inflation is projected to hit 23.2% by the end of 2022.