Turkey Unwinds Currency Protection Scheme: A $60 Billion Departure
Turkey plans to end its deposit protection scheme by 2025, aimed at curbing currency depreciation, which has cost around $60 billion. The scheme's closure marks a shift from unorthodox economic policies. The lira's depreciation has been significant, but recent monetary policy changes aim to stabilize the economy.
Turkey is poised to phase out its deposit protection scheme, a move estimated to have cost the nation approximately $60 billion. The decision comes as part of broader efforts to reverse unorthodox economic policies that once fueled a significant currency crisis.
Authorities project that the KKM scheme, introduced in late 2021, will be terminated by the close of 2025. However, many financial insiders anticipate an earlier exit. Under the scheme, lira deposits were safeguarded against exchange rate depreciation—a significant concern given the lira's historical losses against the dollar.
Despite the strategy's initial popularity, it has dwindled to holding $11.8 billion, a fraction of Turkey's $1.3 trillion economy. The Turkish government credits steady economic policy revisions for hastening the scheme's decline, aligning with a pivot to orthodox fiscal measures beginning in 2023.
(With inputs from agencies.)
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