Crisis in KKM grows: Claims that 'Şimşek wants to end it'
The Foreign Exchange Protected Deposit (KKM) scheme could not be terminated in 2024 as anticipated. It is stated that Minister Şimşek, who wanted to end the KKM—which reached a massive volume of 121.6 billion dollars—as soon as he took office, was forced to follow a gradual approach due to the risk that an abrupt exit would increase demand for foreign currency.
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The economic policies implemented within the framework of the government's "Nas" (religious-based) policies, which were based on the thesis that "interest is the cause, inflation is the result," eventually became unsustainable. However, the Foreign Exchange Protected Deposit (KKM) system, which was a legacy of these policies, became one of the biggest problems for Treasury and Finance Minister Mehmet Şimşek.
ŞİMŞEK'S GRADUAL KKM EXIT PLAN
As soon as he took office, Şimşek wanted to end the KKM, which had reached a massive volume of 121.6 billion dollars, but he was forced to follow a gradual approach due to the risk that an abrupt exit would increase demand for foreign currency. The KKM, which reached a peak level of 3.4 trillion TL in 2023, has declined to 1.1 trillion TL but could not be completely eliminated.
NEW REGULATIONS FROM THE CBRT
As the Foreign Exchange Protected Deposit accounts enter their third year of implementation, there are still 33.7 billion dollars in savings in the system. The Central Bank (CBRT) has taken new steps to accelerate the exit from KKM. In this context:
The conversion target of KKM to Turkish Lira has been reduced from 70 percent to 60 percent.
The minimum interest rate determined for KKM accounts has been lowered from 70 percent of the policy rate to 50 percent.
Interest payments on required reserves for newly opened and renewed KKM accounts have been abolished.
NEW YEAR EXPECTATIONS FROM ECONOMISTS
According to experts, these steps by the CBRT will lower the interest rates offered on KKM accounts, and a faster decline could be seen in 2024. However, the interest rate decision to be taken by the Central Bank next week will be critical in determining whether the savings exiting KKM will head toward TL deposits or other investment instruments.
A BILL EXCEEDING 1 TRILLION TL FOR THE PUBLIC
The KKM system caused massive losses for the Central Bank and the budget. Due to the system, which former Treasury and Finance Minister Nureddin Nebati introduced as the "invention of the century," the CBRT experienced the largest loss in its history. As of 2023, the total public cost of KKM exceeded 1 trillion 58 billion TL. 833.4 billion TL of this loss was covered by the Central Bank, and the remaining portion was covered by the budget.