Turkey’s KKM Scheme Ends: Cost Estimated at $60 Billion
Turkey' s currency-protected deposit program, known as Kur Korumalı Mevduat (KKM), has now reached a complete conclusion after being in operation for nearly five years.
The phasing out of this extensive economic scheme has renewed discussions regarding its significant cost to the Turkish state, a price tag now estimated to be approaching a staggering 60 billion US dollars.
The KKM scheme was introduced by the Turkish government to curb pressure on the Turkish lira and prevent citizens and businesses from moving their savings from the lira into foreign currencies such as the dollar and the euro.
The program guaranteed depositors that they would receive a return equivalent to the development of the exchange rate, in addition to standard interest.
This was intended to motivate people to retain the lira, but it meant that the treasury had to cover the difference if the lira weakened significantly. At its peak, the KKM scheme was extremely popular, with a total deposit balance exceeding an impressive 140 billion US dollars.
This volume testifies to the program' s central role in Turkey' s financial landscape during the period it was active.
After a gradual downsizing, the deposit balance has now fallen to zero, marking the end of one of the country' s most controversial economic instruments.
The economic consequences of KKM have been extensive.
Over the nearly five-year period the program was active, the Turkish Ministry of Finance' s direct payments related to KKM reached around 152 billion Turkish lira.
By including calculations from both the Ministry of Finance and the Central Bank, which also bore part of the burden, the total cost to the Turkish state is estimated to approach a staggering 60 billion US dollars. The enormous cost of the KKM program has been a persistent topic of discussion among economists and within Turkey' s political circles.
Although the scheme temporarily helped to stabilize the lira and limit currency flight, the price tag has been significant for the country' s public finances and national budget.
The conclusion of KKM signals a shift in Turkey' s economic policy, with a focus on more orthodox instruments to manage inflation and currency stability, but the cumulative costs will remain a heavy legacy for the Turkish economy to bear.
Source: Haberglobal
