Treasury and Finance Minister Şimşek: There is no loss in KKM accounts

Treasury and Finance Minister Şimşek stated that they have achieved significant gains thanks to the program they have implemented since the second half of 2024, saying, “First of all, we have strengthened macroeconomic financial stability. We have achieved rebalancing in the economy. We have increased our resilience against shocks. It is valuable that the current account deficit has decreased from around 5.5 percent of the national income to below one percent. We have increased our international reserves. Our gross reserves have risen from 98.5 billion dollars to 159.4 billion dollars as of December 6. Our net reserves, excluding swaps, have increased by approximately 109 billion dollars to 48.3 billion dollars.

Because, of course, one of the arguments here is that this increase was achieved through this, but that is not true. More than two-thirds of this increase came from long-term, cost-effective external resources. It stemmed from portfolio preferences in Turkey. Therefore, even if you call all portfolio investments 'carry trade'—some of which have ten-year, five-year, or two-year maturities—their share in the reserve increase is below one-third. According to international definitions, we have achieved reserve adequacy.

In the last year and a half, our country's risk premium has fallen by more than four hundred and fifty basis points. In the same period, the decline in the risk premium in emerging countries is one-tenth of this. If there is no program, or if a program is not being implemented successfully, one must ask how a country's risk premium can fall more than ten times as much as its peers in the same period.

Before this program, the cost of our ten-year benchmark bond was over ten percent, while today it has fallen to around 7 percent. In other words, Turkey's external financing cost has decreased by 30 percent. The real sector and our banks are accessing financing under much more favorable conditions. Most importantly, we have restored confidence in the Turkish Lira,” he said.

Reminding that the currency-protected deposit (KKM) stock has been falling uninterruptedly for 68 weeks, Şimşek said, “The KKM stock peaked at 3.4 trillion liras last year. As of today, it has fallen below 1.2 trillion liras. The average deposit interest rate in 2024 is 54.6 percent. But the currency increase is not even half of this. Therefore, there is no loss in the KKM accounts that continued in 2024,” he said.

Stating that they have brought the budget deficit under control and have begun to reduce it despite earthquake-related expenditures, Şimşek said, “Look, in 2023 and 2024, we spent 2.6 trillion liras at today's prices to heal the wounds of the earthquake. This corresponds to 75 billion dollars at today's exchange rate.

With the expenditure and revenue measures we have taken, we kept the 2023 budget deficit at 5.2 percent of the national income. In emerging countries, this rate was 5.3 percent last year. In our country, excluding the earthquake, the ratio of the deficit to national income was 1.6 percent last year. In emerging countries, it was 5.3 percent. We aim to reduce the ratio of the budget deficit to national income to 4.9 percent this year and to 3.1 percent in 2025. With the decrease in financing needs, we will also limit the increase in debt and interest burdens from now on. Yes, we are the only country in the world whose credit rating has been increased by two notches by all three major credit rating agencies this year,” he said.

Treasury and Finance Minister Mehmet Şimşek's wife, Esra Şimşek, also followed Minister Şimşek's speech in the General Assembly hall.