Turkish officials and economists reported that a preference for holding physical gold outside of banks is limiting the country's economic development. Finance Minister Mehmet Şimşek stated that approximately $640 billion in gold and foreign currency is currently held outside the formal financial system, a practice locally referred to as "yastık altı," or "under the pillow."
The tradition of stashing gold at home serves as a hedge against inflation and the devaluation of the Turkish lira. Selva Demiralp, an economist at Koç University and former Federal Reserve economist, stated that this behavior is a rational response to historical banking crises and an annual inflation rate of approximately 31%. Many citizens use gold to preserve purchasing power that they believe would be lost in standard bank deposits.
According to the Turkish Finance Ministry, households store roughly 5,000 tons of gold. The head of the Turkish Central Bank valued this hidden wealth at approximately $600 billion at current prices. Research from Koç University indicated that nearly four in 10 respondents rated their trust in commercial banks near zero on a 10-point scale, while more than half gave similar ratings to the national statistical agency.
For the individual, the impact is a lack of liquid capital in the formal economy and a reliance on physical storage for safety. While citizens gain a sense of security against 31% inflation, the broader economy faces a capital drain. Economists noted that because this wealth is not deposited, it cannot be lent to businesses. Furthermore, because a portion of gold must be imported annually to meet demand, the practice increases Turkey's current account deficit.
The effects include a weakened ability for the Turkish Central Bank to manage monetary policy. When wealth stays outside the banking system, the central bank cannot track liquidity or influence economic demand through interest rates. President Recep Tayyip Erdoğan has launched incentives and banking programs to convert physical gold into bank deposits, but these have largely failed to gain traction. The government continues to seek ways to build institutional confidence, but for now, the wealth remains in private homes.