Turkish Minister Simsek criticizes Lira savings scheme
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Turkey's Treasury and Finance Minister Mehmet Simsek aired severe disapproval of the country's main lira savings mechanism.
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Turkish Finance Minister Mehmet Simsek attends the G20 meeting in Baden-Baden, Germany, 17 March 2017. (AFP)
In a meeting with foreign investors on Thursday, Turkey’s Treasury and Finance Minister Mehmet Simsek aired severe disapproval of the country's main lira savings mechanism.
According to Simsek, the program was a bad idea and resulted in many obstacles.
The Turkish KKM program, or “FX-protected lira deposit accounts,” was initially put forward to encourage people to save in Turkish liras rather than foreign currencies by ensuring returns on lira deposits that account for any potential exchange-rate losses.
Since its inception amid a currency crisis in 2021, the total amount of money in the main deposit program has surpassed $100 billion. Because of the program's scale, it has the potential to put pressure on the lira — and the central bank's reserves — if a substantial number of savers opt-out and convert to dollars.
That makes it critical to encourage people to stay in the program, according to Simsek, who questions whether the government now has the capacity to cancel it.
Earlier this week, Turkey's ruling party submitted legislation that shifts the program's expenses to the central bank, rather than the Treasury. Bloomberg reported on Monday that state banks sold $2.3 billion in marketable securities to assist fulfill the demand for dollars caused by aging KKM accounts.
The lira has lost 28% of its value this year, the most among the 31 major currencies monitored by Bloomberg, trailing only the Argentine peso.
According to the sources, Simsek also assured the investors that he had proposed two recognized experts for places on the central bank's monetary committee, although he explained that he was unsure whether his proposals would be accepted.
