When Turkish finance minister Nureddin Nebati announced last
week plans to encourage households to convert their gold holdings into Turkish
liras in a bid to shore up Turkish central bank reserves, he was targeting
people like Esra G.
اضافة اعلان
G., whose last name has been abbreviated to preserve her
anonymity, has had a life-long troubled relationship with gold. When she was
barely three years old, her distaste for it as an adornment was already so
strong that she dumped all her gold rings, bracelets, necklaces, and earrings
into the Bosporus.
Nonetheless, she grew up to be an avid collector of gold,
including an assortment of five- and 10-gram Credit Suisse coins. As a young
woman, G. preferred antique silver jewelry and would not wear gold, but kept
her gold collection under the pillow.
“Gold is a tradition. It grows out of a deep-seated distrust
of governments and currencies and has been handed down from generation to
generation. They did not take money. They took gold,” she said.
“I am a child of that system. ... I want the gold where I
can touch it and feel it.”
It is the many people like G. that Nebati is targeting. The
minister recently told investors in London that he hoped his scheme would
convert 10 percent of the estimated $250-$300 billion worth of gold squirreled
away in the homes and backyards of Turkey, much of it by women.
Ayse Esen, head of a leading Turkish gold refinery, shared
Nebati’s estimate.
“We are aware of the fact that there are around 3,000-5,000
tons of gold saved under mattresses, which amounts to an informal economy with
a size of $200-$300 billion,” Esen, CEO of Istanbul Gold Refinery (IAR), said.
According to the World Gold Council, official Turkish gold
reserves dropped from a high of 583 tons in July 2020 to 392 tons a year later.
Speaking to Sabah, a pro-government daily, Esen, probably
unwittingly, suggested that convincing Turks to convert their gold could prove
to be an uphill battle. She noted that a program launched 10 years ago by the
refinery and commercial banks had so far netted a mere 100 tons of hidden gold.
Lack of confidence in the government is only part of the
problem. As important is the fact that much of Turkey’s gold hoard is
non-negotiable because it is held in the form of jewelry. Turkey’s 40,000
jewelers turn approximately 150 tons of gold into jewelry a year.
Nebati reportedly told investors that some 30,000 gold shops
would purchase privately held jewelry as part of his scheme and sell it to one
of five government-contracted refineries that are believed to include IAR. The
refineries would convert the jewelry into bullion that could be added to the
central bank’s reserves.
It is not clear why Nebati believes his scheme would work
this time around when earlier attempts failed. One such effort involved
creating a facility that allowed holders of gold to deposit it with banks in
exchange for gold certificates that would have been negotiable on a gold exchange.
G. had vowed decades ago that she would never trust a bank
with her gold, even though she does not hesitate to deposit money in a bank.
She, like many Turks, is historically suspicious of
authority, and many of them see hoarding gold not only as a safe investment but
also as a reserve that cannot be taken away from them. Neither does it violate
the Islamic ban on interest.
In the early 19th century, Turks hoarded gold to evade
Ottoman taxes, which were based on what taxpayers physically possessed when the
tax collector came around. As a result, Ottoman subjects bought gold and buried
it not to be counted and taxed. Despite the Ottomans’ later introduction of
paper money, Ottoman subjects continued to view gold as their most secure form
of investment because of inflation.
“People did not trust it,” said a gold trader.
“The certificate had no relationship to the gold. It was
devalued by inflation, and people have distrusted paper money ever since. …
gold has become a symbol of distrust of the state.”
“I’ve been in this business for decades and have seen a lot
of change. One thing never changes, and that is gold. Our money is worthless;
gold is much better. Besides that, gold is part of our history,” added a
jewelry repair shop owner.
Trust as much as tradition may prove to be Nebati’s Achilles
heel.
By attracting hidden gold, Nebati aims to help the
government stop the freefall of the Turkish lira, which lost more than 40
percent of its value last year, and halt the spiraling out of control of
inflation that last month hit 36.1 per cent.
Many blame the crisis on President Recep Tayyip Erdogan’s
idiosyncratic push to cut interest rates based on his unorthodox belief that
this would lower consumer prices.
As a result, a whopping 75 percent of respondents in a
survey in December by Metropoll, a Turkish polling company, said their trust in
the government’s economic policies had decreased. More than half of those
polled said they disapproved of Erdogan’s performance.
Erdogan has undermined the independence of the Central Bank,
fired three of its governors and other officials opposed to his interest cuts
in the last two years, changed finance ministers four times since 2018, and
spun conspiracy theories by blaming a mysterious foreign interest cabal for
Turkey’s economic plight.
Public distrust recently manifested itself further in a wave
of protests over massive electricity price hikes as millions struggle to pay
ballooning bills and inflation threatens to force businesses into bankruptcy.
Erdogan has recently suggested that he would halt or slow
down the lowering of interest rates as a series of emergency measures helped
the lira recover some of its value against the dollar.
The measures pushed Erdogan’s approval rating up by two
points to 40.7 per cent in January, still far behind the 54.4 per cent who
evaluate the president’s performance negatively.
Polls show that Erdogan would lose to Ankara Mayor Mansur
Yavas and Istanbul Mayor Ekrem Imamoglu – both from the main opposition
Republican People’s Party (CHP) and Iyi (Good) Party Chairwoman Meral Aksener,
at the next elections.
Erdogan’s numbers hardly project the degree of confidence
that Nebati is likely to need to persuade his intrinsically skeptical
compatriots from parting with their precious gold.
Said a former Istanbul banker: “People are unlikely to put
their holdings at risk for a scheme that does not guarantee their ability to
preserve whatever wealth they have. Certainly not at a time of economic turmoil
and a widening gap in trust.”
The writer is an award-winning journalist and scholar and a
senior fellow at the National University of Singapore’s Middle East Institute.
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