Report: Turkey Exits From Foreign Exchange Protected Deposit Program

On Jan. 1 Turkey ended its two-year-old overseas speech (FX)—protected deposit programme successful what is seen arsenic different measurement towards a instrumentality to orthodoxy. Treasury and Finance Minister, Mehmet Simsek besides signaled the commencement of what helium called a “permanent betterment successful the existent account.”

Turkey’s Policy U-Turn

Turkey’s Treasury and Finance Minister, Mehmet Simsek, precocious disclosed that the state volition extremity its overseas speech (FX)-protected deposit program, besides known arsenic KKM, successful 2024. This determination is the latest successful a bid of argumentation u-turns that Turkey has made successful the past mates of months.

Programımızın olumlu sonuçlarını yeni yılda da almaya devam edeceğiz.

2024 yılı;
•Yıllık enflasyonda düşüşün başladığı,
•Rezerv yeterliliğinin daha da arttığı,
•Kur korumalı sistemin sonlandığı,
•Cari açıkta kalıcı iyileşmenin başladığı,
•Bütçe disiplininin tesis…

— Mehmet Simsek (@memetsimsek) December 31, 2023

Following his re-election successful May 2023, President Recep Tayyip Erdoğan instantly signaled the country’s instrumentality to orthodoxy by appointing Simsek arsenic the Finance Ministry head. The cardinal slope aboriginal each but confirmed the large argumentation displacement by sharply raising involvement rates.

Before his re-election, President Erdoğan and his authorities resisted devaluing the lira oregon raising involvement rates. Instead, the authorities pursued respective argumentation measures including the KKM programme whose nonsubjective was to bolster the lira and halt the evident dollarization of slope deposits. Under the program, Turkish residents who maintained their savings successful section currency were guaranteed returns that compensated for immoderate speech rate-related losses.

However, successful his Dec. 31 post connected X, Simsek, 1 of the erstwhile Wall Street bankers successful Erdogan’s government, said:

“2024 volition beryllium a twelvemonth [where] yearly ostentation starts to decline, reserve adequacy increases further, the overseas speech protected strategy ends, a imperishable betterment successful the existent relationship begins, and fiscal subject is established.”

Simsek confirmed Turkey’s exit from the KKM programme conscionable a fewer months aft helium suggested that this process could beryllium achieved without offering incentives. According to a state-run quality agency, banks were expected to halt offering FX-protected lira deposit accounts for savings connected Jan. 1.

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