A high yielding currency such as the Turkish Lira is always worth consideration for investment. Those who buy Turkish Lira at the right time will be richly rewarded. However, the timing is essential. Otherwise, you may end up with less than you bargained for.
In the past, I have been very critical of investment options in Turkiye, especially between 2017 to 2023. Read more below to understand why. Nonetheless, times can change. I think you may agree.
Consider buying Turkish Lira when the time is right, you can enjoy sustainable high yielding benefits. This may indeed be the emerging market investment opportunity you have been waiting for!
So how do you buy Turkish Lira for investment? First you will need to get a bank account in Turkiye, which is mostly a technicality. The primary requirement is Turkish residency which you can get in a few different ways.
Once you have the residency card, you can walk into any bank in Istanbul, or just apply online. But some banks are better than others, so make a wise selection. Offshore bank accounts are indeed valuable assets to have. There are multiple benefits, not only high yielding time deposits.
- Why You Should Buy Turkish Lira Now
- How To Invest In Turkiye
- Proper Due Diligence (Disclaimer)
- A New Era Begins for Turkiye
- History of the Turkish Lira 1980s
- New Currency Crisis 1994
- Main Fiscal Indicators, Inflation and Growth Rate
- A New Administration Tries to “Lower Interest Rates”
- Temporary Solutions to the 1994 Financial Crisis
- A New Economic Crisis in 2001
- When to Buy the Turkish Lira 2002-2016
- Reversion to Heterodox Economic Policy 2016-2023
- Erdogan Comes Full Circle…
Why You Should Buy Turkish Lira Now
Historically, Turkiye has suffered through periods of economic instability. On the other hand, instability breeds opportunity. The economic outlook is starting to look stable creating some incentives to buy Turkish lira in 2025. There are many benefits to consider.
Turkiye banks are now whitelisted by the Financial Action Task Force (FATF); plus there are no capital controls and interest rates on fixed deposits are at about 42% at time of writing.
In addition, the Turkish government appears to be sticking with the austerity program that has been in effect for over 14 months now. Positive results are increasingly evident creating an encouraging investment signal.
Will the central bank (CBRT) stick with the austerity program? So far so good, indeed if you had bought the Lira at this time last year, you would have accrued approx. 30% net annual yield for 2024. This accounts for currency depreciation and tax, not bad at all.
How To Invest In Turkiye
There are multiple ways to get a bank account in Turkiye, all of which include multiple benefits, not only high interest time deposits. Therefore, wise offshore investors may consider investing in Turkish residency or citizenship.
Either option will provide you with residency card within a few weeks, the card allows you to open local investment accounts. Turkiye banks are modernized, with impressive online banking options.
Online banking offers an array of investment options. This includes the option to buy government bonds, fix high yield time deposits, buy precious metals such as gold or hold FOREX if it is your preference.
Residency requires a minimum real estate investment of USD 200,000 equivalent. Or increase the investment amount to USD 400,000 outlay and get a new passport. Either way, you can open a bank account fast and easy, in fact it is one of the first steps when you begin the application process.
In addition, under the citizenship program you are only required to retain the investment for a three year holding period. After which you are free to sell the asset to recoup your capital, while retaining Turkish citizenship in perpetuity.
Get access to multi-pronged offshore investment benefits in one swoop. New residency and citizenship, a second home on the Turkish Riviera, plus stable offshore banking and high investment yields to fund global travel or whatever it is you wish to do.
There is an additional benefit that most investors are unaware of. Essentially, there is no income tax on foreign sourced income if you reside in Turkiye for less than 183 days per year of assessment.
Disclaimer: Buy Turkish Lira After Due Diligence
The recovery phase of a financial crisis can be a welcome opportunity for offshore investors. This is because the government will often provide incentives to encourage foreign money flows into the country.
*Disclaimer: In order to safely buy Turkish Lira and invest offshore, historical analysis and prudence are essential.
The following brief financial history of Turkiye covers the latter half of the 20th century. To successfully invest in a foreign country, independent analysis is essential. I suggest you should do the same.
Prudent investors will find “The 1994 Economic Crisis of Turkey” to be very helpful. Here you will find the analysis of the 1994 crisis including, including the prelude and the aftermath.
Indeed, the history of economic crises often repeats itself, especially in Turkiye. Therefore, historical patterns emerge which can serve as warning signals, but also signals to buy Turkish Lira when the time is right.
A New Era Begins in Turkiye
In the beginning, emerging markets often experience exchange rate volatility and high inflation. Under the circumstances in Turkiye at the turn of the 19th century, such was the case.
Indeed, the collapse of the Ottoman Empire and the resulting Turkish war of Independence only came to a conclusion in 1923. However, the successful end to the war allowed for the stabilization of the country. It was a crucial inflection point in the history of Turkiye.
At the outset, security was the primary consideration. The successful outcome of the war allowed Turkiye to secure its borders from intruding European colonial powers. The new government could now concentrate on modernization.
Under the new leadership of Mustafa Attaturk, Turkiye’s modernization included transforming the country into a secular, democratic nation state, from what was previously an Islamic Caliphate.
Indeed, the country’s political and financial institutions needed to be completely restructured. The process began with the Westernization of political institutions in 1934 which gave citizens the right to vote and be elected, including women.
The government gradually gave way to institutional reforms, however the transition was not seamless. Political instability emerged in the 1970s which proved to be unmanageable. This resulted in a military coup in 1980.
Political instability occurs when no political party has a strong backing. This results in weak coalition governments. In turn, frequent elections are called every 1-2 years, which results in political pump priming and poor financial oversight in order to entice voters.
Under the circumstances in 1980, Turkiye’s military coup was a blessing in disguise since it created a sustained period of political stability.
History of the Turkish Lira 1980s
As referenced above, the 1970s was characterized by political instability which lasted throughout the decade. This culminated in a military coup on September 12, 1980. As a result, the Turkish military was now back in control of the government (it was not the first coup in Turkiye).
Indeed, an essential result of the coup was that the military had limited the number of political parties who could participate in elections. This resulted in stronger, consolidated political parties that could hold on to their seats for longer duration.
During this period of political stability, the government was able to implement sensible economic policy. A task that proved impossible prior to the coup. But this time around, economic reforms were able to take hold and the economy showed significant improvements.
The government achieved a “record low” inflation rate of 25.2% in 1982. To put things in perspective, that was down from an eye watering 107.2% inflation rate in 1980. It just goes to show that if politicians work with financial institutions to implement sensible financial policies, the benefits are significant.
Unfortunately, it was not to last. From 1987-1993 a new election cycle began with the easing of the restrictions on political parties, with predictable results. Politicians immediately reverted to unsustainable economic policies.
This included coercing the central bank to monetize the deficit, wage suppression and elimination of crucial domestic funding sources. The result was perfect storm that would set the stage for back to back financial crises in 1994 and again in 2001.
Turkiye Currency Crisis 1994
After suffering from the government’s austerity initiatives during the first half of the 1980s, liberalization was high on the political agenda. As a result, in 1987 the military removed restrictions on political parties allowing anyone to participate in the new elections.
This created a new series of highly fragmented coalition governments, setting the stage for political turmoil. In addition, weak barriers between politicians and financial institutions allowed old habits to reemerge.
Once again, weak coalition governments gave way to imprudent economic policy decisions in order to appease voters, which led to more economic instability and continuous weak coalition governments. A negative feedback loop, not easy to rectify.
To keep inflation under control, governments need to control spending and keep government debt at a manageable levels. This is done through fiscal prudence and tight monetary policy. However, the political backsliding would now set the stage for a new financial crisis.
Although economic stability is reinforced, at least initially, by tight monetary and fiscal policy it is never popular with voters. A weak coalition government lacks the necessary leverage to maintain prudent economic policy. The result is populist economics which was especially apparent between 1993-1994. See table below.
Main Fiscal Indicators (% of GNP), Inflation, and Growth Rate
(Source: The 1994 Economic Crisis of Turkey)
| 1992 | 1993 | 1994 | |
| Gov. Borrowing | 10.6 | 12.0 | 7.9 |
| Public Debt | 41.8 | 44.3 | 62.3 |
| -Domestic | 10.5 | 12.8 | 13.9 |
| -Foreign | 31.3 | 31.5 | 48.4 |
| Real Interest Rate | 9.6 | 13.0 | 28.2 |
| Inflation Rate | 70.1 | 66.0 | 106.3 |
| GNP Growth | 6.4 | 8.1 | -6.1 |
Indeed, between 1993 and 1994 you can see profound changes in the levels of total public debt, foreign held public debt, real interest rates (nominal interest rates minus inflation rate) and the ensuing crash in gross national product (GNP) growth. So what caused the new crisis?
In 1993, President Turgut Ozal died which created a reshuffling of the coalition government. As a result, the economic pragmatism of President Ozal’s administration was to be quickly disregarded.
Indeed, the new president’s stated goal was to “lower interest rates” despite the high inflation and weak exchange rates at the time.
The New President Lowers Interest Rates
In order to lower interest rates, the government eliminated short term domestic funding because interest rates were too high. To fill the funding gap, the government coerced the central bank into funding the deficit.
This was unfortunate because domestic funding sources (the public) had been a sufficient and legitimate source of government funding that proved to be indispensable. On the other hand, funding from the central bank resulted in hyperinflation.
Central bank funding was obviously not sustainable, so the government opened the capital account to encouraged hot money flows. Hot money flows are when foreign investors, usually large institutions, deposit significant amounts of money in the country to take advantage of high interest rates. It usually works, at least initially, but with caveats.
Opening the capital account was indeed effective at financing the deficit. This is seen in the profound rise of foreign held public debt 31.5% of GNP in 1993, to 48.4% of GNP in 1994.
However, hot money inflows can quickly turn to outflows if they perceive that government policy is unsustainable. As a result, this reversal of fund flows crashed the foreign exchange rate, while the delayed response of the government (in order to not unsettle voters prior to elections) resulted in the financial crisis of 1994.
Temporary Solutions for 1994 Currency Crisis
In the immediate aftermath of the currency crisis of 1994, the Turkish Lira depreciated 70% against the USD and GNP dropped by 6%. In addition, the lower exchange rate caused the cost of imports to skyrocket and consumer inflation reached 150% between January and April 1994.
The government responded with an economic stabilization program in April 1994. The government also entered a stand by agreement with the IMF. In return, the IMF provided a $720 million loan to implement the stabilization program.
At least in theory, many of the contributing factors to the 1994 financial crisis were addressed in the agreement. For example, the government agreed to privatize certain state owned economic enterprises, end subsidization, provide full coverage insurance for bank deposits and devalue the Turkish Lira by 39%.
The government also fully reinstated domestic financing of the public debt. Plus, a very unpopular 5% tax on the government securities market was eliminated. These adjustments were essential to restore financial liquidity.
Thanks mostly to IMF monitoring of the stabilization program, at least at the outset, it proved to be an effective short term solution.
Indeed, the government’s nominal consolidated budget revenues increased by 110.3%. In further benefit, government expenditures increased by only 84% while the consolidated budget deficit decreased from 6.7% in 1993 to 3.9% in 1994.
Furthermore, foreign exchange reserves at the central bank rapidly recovered, while wages declined (which was very helpful, but would soon result create problems with the employee unions).
In further benefit, exports increased by 10.8% while imports declined by 23% compared to the same period in 2023. As a result, the current account deficit of $1.1 billion in the first quarter of 1994 transformed to a surplus of $2.2 billion in the second quarter 1994. Unfortunately, it was not to last.
A New Economic Crisis for 2001
In the beginning of 1994, Turkiye’s stabilization program had showed encouraging results. However, increased pressure from certain socio-economic groups, especially labor unions, due to suppressed wages, put heavy pressure on the coalition government. This resulted in early elections being called for the Fall of 1995.
To make a long story short, in response to early elections, the government abandoned all prudent economic and fiscal policy and reverted to the same destructive policies that had caused the 1994 crisis.
This set off a new cycle of political pump priming and premature elections which allowed the Turkish economy to stumble along for a few years until the inevitable financial crisis reemerged in 2001.
Due to the extreme nature of the 2001 crisis, the government recalled the IMF. The IMF proposed stringent austerity protocols and offered emergency funding. After a shaky start, including an unexpected currency devaluation and a new funding round, things got back on track.
The government had faithfully adhered to the austerity program! But predictably, since austerity programs are always severely disliked by the voters, any administration that dares to force through sensible economic policy is promptly thrown out of office. Hence, the demise of the Republican People’s Party (CHP) that still persists, even today.
Nonetheless, thanks to CHP holding the line with prudent economic policy, the Turkish economy achieved a new dawn starting in 2002 which would usher in a lasting period of low inflation, stable exchange rate, economic growth and political stability. Indeed, it was a once in a lifetime opportunity to buy Turkish Lira and invest in Turkiye!
When to Buy Turkish Lira 2002-2016
In 2002, voters elected Recep Tayyip Erdogan (Erdogan) in a landslide victory for the Justice and Development Party (AKP). Erdogan would then serve as prime minister from 2003 to 2014. Beginning in 2014, Erdogan stayed in office by serving as president and remains as Turkiye’s president at the time of writing.
In contrast with previous fragmented administrations prior to 2002, AKP was able to maintain a strong voter mandate. Indeed, the economy remained strong under AKP leadership, this persisted even through the 2008 global financial crisis.
As a result, AKP remained unified with no need to form weak coalition governments. Furthermore, Erdogan took the opportunity to strengthen his control over Turkiye’s government institutions.
Erdogan effectively acquired authoritative control over the government, including control of the Turkish media and foreign policy. In addition, Erdogan had unchecked authority to fire the governor of the central bank, the finance and treasury minister or anyone for that matter who was not well aligned with the AKP priorities.
Nonetheless, the period of unprecedented political and economic stability which had began in 2003 would last until a foreign backed coup attempt occurred in 2016 which nearly toppled the AKP regime.
Although AKP with President Erdogan in control, was able to defeat the coup and stay in power, it marked the end of the period of stability AKP had enjoyed since 2003. The result of the coup was that AKP’s grip on power was weakened.
Additional pressure resulted when Turkiye’s long anticipated EU membership was cast in doubt. These factors resulted in Erdogan’s reversion to heterodox economic policies. The consequences of which would soon follow.
Reversion to Heterodox Economic Policy 2017-2023
Heterodox economic policy is when the government uses unorthodox policy such as price controls or populist economics. For example, after the 2016 coup, Erdogan was faced with upcoming elections, but the central bank had been raising interest rates to combat rising inflation.
As previously discussed, austerity programs are always very unpopular with voters. So Erdogan claimed that “high interest rates cause inflation” and a succession of central bank officials were removed in order for Erdogan to implement his heterodox policy.
For Erdogan and AKP, heterodox policy was successful since he was able to win the elections. But at what cost? The negative repercussions to the Turkish financial system were profound.
Between 2017 when Erdogan began the heterodox reversion and 2023 when he finally allowed for the reinstatement of orthodox policy, the Turkish Lira had depreciated over 90% against the USD, hyperinflation had become entrenched and foreign currency reserves had been severely depleted.
Erdogan comes full circle…
Indeed, Erdogan had come full circle. After inheriting a stable economy at the expense of CHP in 2003, Turkiye was now right back where it started from. Ironically, Erdogan is now in the same unenviable political situation as CHP was in 2002.
Erdogan has since reverted back to orthodox monetary policy in June 2023 by reinstating Mehmet Simsek as treasury and finance minister. Foreign exchange reserves have since recovered and the currency stabilized.
Interest rates were raised to 50% and remained so until the first interest rate cut in December 2024. Disinflation is evident and real interest rates have remained in positive territory.
Will reversion to orthodox monetary policy save Turkiye’s economy? Yes of course it can, but only if the government maintains the austerity program. Therefore, 2025 could be a new dawn for Turkiye, the same as in 2003.
Or another scenario is that Turkiye will stumble along, maintaining high interest rates and austerity but also easing in some areas such as raising minimum wage.
Either way, those holding Turkish Lira in high yielding fixed deposit accounts will have downside protection and the potential to reap high returns above the inflation rate.
The next elections are not scheduled until 2028. The longer you wait, the higher the risk of getting caught up in a new election cycle.
This may be a prime opportunity to make very good returns in Turkiye. In contrast the economic outlook in Europe, China and potentially the US is notoriously uncertain as we wade into 2025 with a new US administration soon to be making waves (once again).
In further benefit, get a new passport and solidify your offshore banking profile in Turkiye. The time is now to buy Turkish Lira.