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President Erdogan's government announced extraordinary measures earlier this week to boost the Turkish

lira, including a new savings product designed to protect savings from currency fluctuations.

These savings schemes are set to be rolled out in a few days and we don't yet know how much

take-up they'll be or what the impact will be on the public finances in Turkey.

The Turkish lira rose more than 40% against the dollar after the announcement, and it's

been rallying ever since.

This is a dramatic change in direction after the exchange rate had hit a record low the previous

day.

Monday was the most volatile day of trading for the lira since the new Turkish lira was introduced.

The idea of this savings product is that the Turkish Treasury will make up for losses incurred

by savers if the lira falls by more than the central bank's interest rate against the

dollar over the life of the savings plans.

This investment is available to individuals but not to businesses and the accounts will

have maturities between 3 and 12 months.

The minimum interest rate will be the central bank's benchmark rate and no withholding

tax will be applied.

So if banks pay 14% for one-year lira deposits, but the currency depreciates by more than

that against the dollar in the same period, the Treasury, which really means the taxpayer,

would pay the deposit holders the difference.

Let's take a look at how the scheme works and

what it might mean for the Turkish economy. So Turkish savers under this scheme are allowed

...