Turkey to end costly $60B currency-protection scheme — for now
Ankara could soon close the book on a monetary intervention launched to defend the lira in 2021, the latest pivot back to more conventional economic policies following the country's 2023 presidential election.
In the latest step in Turkey’s retreat from unorthodox economic policies, the government is preparing to shutter a massive currency-protection scheme that will leave behind unanswered questions and a hefty price tag for taxpayers.
On Aug. 8, Reuters reported that Turkey plans to soon terminate a multibillion-dollar program, known by the acronym KKM, by the end of 2025. In doing so, Ankara will exit a major monetary intervention scheme that once stood at the center of the government’s defense of the lira, before a pivot back to conventional monetary policy following President Recep Tayyip Erdogan’s 2023 reelection, when a new economic team began reversing years of rate cuts and market interventions that had fueled inflation.
Introduced in December 2021 as the country’s currency spiraled, KKM allowed savers to park money in lira accounts with state guarantees against exchange-rate losses. In the process, the government hoped to stabilize the currency’s slide alongside assuaging public concerns.
At its peak in August 2023, KKM balances surpassed $140 billion. Despite this, the value of the battered currency still lost 29% of its value against the dollar in 2022 and another 37% in 2023. That pushed up the massive scheme’s price tag for the government, with payouts tied to the program reaching an estimated $60 billion by the end of 2024.
