KKM Unaffected – Sözcü News Update

Turkey Scraps KKM, Signaling Shift in Monetary Policy

Istanbul, Turkey – The Central Bank of the⁤ Republic of Turkey (CBRT) has officially closed the Kur Korumalı Mevduat (KKM) – the Turkish Lira-protected deposit scheme – effectively ‍ending a policy designed to combat inflation by guaranteeing returns against currency depreciation. The move, announced via communiqué on May 22, 2024, signals a significant shift towards more conventional monetary policy under ⁣the leadership of Finance Minister Mehmet Şimşek and CBRT Governor Fatih Karahan. The decision comes after a period of intense debate regarding the scheme’s cost and effectiveness,⁤ and follows⁢ a ⁢recent election period were its continuation was a point of contention.

The KKM was introduced in December⁢ 2021 as a response to a sharp depreciation of⁣ the Turkish Lira. It guaranteed depositors returns equivalent to the USD exchange ⁢rate at the⁢ time of deposit, with the central bank covering the difference if the Lira depreciated beyond that rate. While initially popular,‍ the scheme proved costly, depleting⁢ the CBRT’s foreign exchange reserves⁢ and contributing ⁢to inflationary pressures.

The closure of the⁣ KKM was widely anticipated ⁢following the local elections⁣ in March, which saw a setback for the ruling AK ⁤Party. Şimşek and⁤ Karahan ‍have consistently advocated for a return to orthodox monetary policy, emphasizing the need ⁣to ‍restore credibility and attract foreign investment.

According ⁤to a statement ⁣released by the CBRT, existing KKM accounts will not be affected untill their maturity dates.Depositors will continue to ‍receive the guaranteed returns until then. Though, no new KKM accounts will⁤ be opened. The CBRT also emphasized its commitment to price stability and its determination to bring inflation⁤ under control.

Impact and data

The KKM’s impact on the Turkish economy can be seen in the following data: