Currency-Protected Deposit Scheme to End in 2025
The Central Bank of the Republic of Turkey (CBRT) announced plans to terminate the Currency Protected Deposit (KKM) application within 2025. According to information in the CBRT's monetary policy document, this step is being taken to strengthen the Turkish Lira and reduce the effects of foreign currency-indexed deposits on the financial system.
The announcement stated that as the disinflation process becomes apparent in 2025, demand for Turkish Lira assets will continue, and the share of TL deposits will continue to increase. Additionally, the decrease in KKM accounts is expected to open the way for simplification steps in regulations in this area, leading to the termination of the application.
Monetary Policy and Communication Strategy Defined The CBRT emphasized that its monetary policy stance is set to ensure the continuation of the disinflation process. The bank highlighted that foreign exchange rates will continue to develop under free market conditions and that it will not engage in any foreign currency purchases or sales aimed at determining the level or direction of the rates.
Furthermore, the CBRT announced that it will maintain effective communication with the press, academicians, and investors, using social media accounts as an effective communication tool. The primary objective of the Central Bank is identified as ensuring price stability, and it was expressed that all available tools will be utilized towards this aim.
History and Cost of the KKM Application The Currency Protected Deposit system was first implemented in December 2021 to control the sudden rise in foreign exchange rates. With KKM, deposits in TL were aimed to be protected against exchange rate fluctuations, while reducing the demand for foreign currency. However, the cost of the system has imposed a significant burden on the Treasury and the Central Bank as foreign exchange rates continued to rise.
As of 2023, the cost of KKM reached hundreds of billions of lira, creating serious pressure on public finances. Mehmet Şimşek, who took over the economic portfolio after the elections on May 14, 2023, had previously announced plans for the long-term removal of KKM to mitigate these risks.
Reasons for the Termination Decision The decision to terminate the KKM application is based on the goals of reducing costs and increasing confidence in the Turkish Lira. The costs arising from exchange rate differences place a burden on the state budget, and the removal of foreign currency-indexed mechanisms is viewed as a strategic step to enhance the value and stability of the Turkish Lira.
This decision aims to create a more sustainable economic structure in foreign exchange markets. Experts indicate that this change could bring significant alterations to the banking sector and savers, expecting a positive impact on foreign currency demand and market fluctuations.