After Political Shock, Türkiye’s De-Dollarization Trend Resumes

Following a sharp rise in dollarization after Istanbul Mayor Ekrem İmamoğlu’s arrest on March 19, Türkiye’s foreign currency demand is now showing signs of reversal. According to recent data from the Central Bank of the Republic of Türkiye (CBRT) and the Banking Regulation and Supervision Agency (BDDK), the de-dollarization trend has resumed over the past three weeks, with Turkish lira (TL) deposits gaining ground.

In the eight weeks after March 19, foreign exchange deposits (DTH) surged by $7.1 billion, including a massive $5.86 billion spike in just the week of March 21. However, parity-adjusted data now shows a net outflow of $1.68 billion from DTH accounts over the past three weeks — $698 million from individuals and $986 million from corporate accounts.

TL Deposits on the Rise as Dollarization Retreats

The BDDK confirms this shift in its weekly banking data. While the dollarization ratio climbed to a 2025 peak of 42.56% by the week of April 25, it declined to 42.25% by May 9, reversing a multi-week trend. During this same period, the share of Turkish lira deposits in the total deposit base increased to 57.75%.

Even when excluding FX-protected accounts (KKM), foreign currency deposit ratios have edged downward, from 39.38% in late March to 39.35% in early May, suggesting the shift is not solely due to government-backed schemes.

Minister Şimşek: “Financial Indicators Are Recovering”

Treasury and Finance Minister Mehmet Şimşek acknowledged the declining FX demand, attributing it to improving financial conditions and stabilization in investor sentiment.

“Demand for foreign currency deposits and our credit default swap (CDS) rates are falling. At the same time, the Central Bank’s gross reserves rose by $5.8 billion in a single week,” he said on social media.

Şimşek emphasized the government’s commitment to its disinflation program, stressing the need for permanent price stability through disciplined fiscal and monetary policy.

“We will continue to implement our policies decisively,” he noted, citing “diminishing global uncertainties and recovering indicators” as key tailwinds for the economy.

Analysis: Confidence Returns, but Volatility Remains

Economists interpret the recent FX retreat as a delayed stabilization response to Türkiye’s strict monetary tightening. The March political uncertainty had spurred retail investors to seek shelter in dollars, but confidence-building measures and incentives to return to TL-denominated assets are slowly restoring balance.

Analysts caution that sustaining the de-dollarization trend will depend heavily on ensuring both political and economic stability. Continued declines in FX deposits could provide the Central Bank with greater room to rebuild reserves and maintain exchange rate stability more effectively.

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