Turkey officially ends lira protection program introduced in 2021
Photo: EPA

Turkey has officially terminated its foreign currency protected deposit program, which was introduced in December 2021 to support the lira during the previous currency crisis. About writes Bloomberg citing the country's central bank.

As noted, no new accounts with FX lira protection will be opened, and existing ones will not be renewed from August 23. Deposits opened before this date will continue to be valid until the end of the term.

The program, known as Kur Korumalı Mevduat (KKM), was initiated by President Recep Tayyip Erdoğan. It guaranteed that the government would cover depositors' losses in liras if the exchange rate depreciation exceeded bank interest.

KKM's goal was to curb demand for dollars and stabilize the lira, which was under pressure.

At first, the program caused the national currency to appreciate. Later, however, to reduce inflationary pressures, Erdogan replaced the economic team with a more orthodox one, raised interest rates, and announced the gradual termination of KKM.

Finance Minister Mehmet Şimşek said that the program in 2024 made it difficult to fight inflation and disrupted the mechanism of monetary policy transmission.

"We have achieved another important goal of our program. Financial stability will be strengthened with the termination of KKM, which was an important contingent liability," said Šimšek.

According to the regulator, as of August 15, the volume of deposits under the program fell to 440.6 billion lira (about $11 billion), after a record 3.4 trillion lira in 2023.