Turkey’s Treasury and Finance Minister Mehmet Simsek expressed strong criticism of the nation’s flagship lira savings tool during a private meeting with foreign investors on Thursday, according to people familiar with the discussions.
(Bloomberg) — Turkey’s Treasury and Finance Minister Mehmet Simsek expressed strong criticism of the nation’s flagship lira savings tool during a private meeting with foreign investors on Thursday, according to people familiar with the discussions.
Creating the so-called KKM program, or “FX-protected lira deposit accounts,” was a bad idea that has created significant challenges, Simsek said. The program was designed to encourage more savings in Turkish liras rather than foreign currencies by guaranteeing returns on lira deposits that compensate for any potential exchange-rate losses.
A former Wall Street analyst who was appointed last month by Turkey’s President Recep Tayyip Erdogan to oversee the country’s financial affairs, Simsek said the government would look to terminate the program when it had enough resources to do so smoothly, the people said, asking not to be named because the talks were private. Simsek’s office declined to comment on the meeting.
The total amount of money in the flagship deposit program has exceeded $100 billion since it was introduced during a currency crisis in 2021. The program’s size means that it can create pressure on the lira — and the central bank’s reserves — if large numbers of savers choose to opt out and convert back into dollars.
That makes it important to persuade individuals to remain in the program, Simsek said, expressing doubts about whether the government currently has the resources that would be required to terminate it.
Earlier this week, Turkey’s ruling party introduced a bill that passes the costs of the program onto the central bank, whereas before they had been shared with the Treasury. On Monday, Bloomberg reported that state banks sold $2.3 billion on the market to help meet demand for dollars driven by maturing KKM accounts.
The lira has last 28% of its value so far this year, the biggest decline among 31 major currencies tracked by Bloomberg, after the Argentine peso.
Simsek also told the investors that he had recommended two respected economists for positions on the central bank’s monetary committee, the people said. He said he was uncertain about whether his suggestions would be accepted, they said.
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