Latest strategy by Turkey’s Financial Management: Get rid of “Currency Indexed Deposit Accounts”

Turkey’s financial management, led by Mehmet Şimşek (Finance Minister) and the Central Bank (chair person, Gaye Erkan), has developed special plans to bring a cure to the challenging financial environment the country is currently facing. Here’s what they are allegedly attempting to do:

It is said that instructions have been given to private banks not to open KKM (Currency Indexed Deposit Accounts) accounts, any more. About a year ago, the then Minister of Finance (Mr. Nureddin Nebati) presented the KKM as a groundbreaking solution of the century (in his own words) to cut the demand for the dollar. However, the KKM has turned into a financial sinkhole for the government.

CONVERT KKM ACCOUNTS INTO TL DEPOSIT ACCOUNTS

Now having realized this after all this time (thankfully), the administration will be trying to convert KKM accounts into regular TL (Turkish Lira) deposit accounts with the promise of high interest rates. This will eliminate the government’s need to provide dollars, for the markets in particular.

TL DEPOSIT ACCOUNTS WITH HIGH INTEREST RATES

Based on said plan, account holders will keep their funds in TL accounts for a period of time at the promised high interest rates. Following the local elections scheduled for March 31, 2024, the TL will be devalued, resulting in the loss of real value for these funds and loss in investments of regular citizens.

ISBANK: WE WOULD RATHER BUY GOVERNMENT ISSUED BONDS

The CEO of the largest private bank, İş Bankası, is said to have objected to this plan. Based on his approach to the issue, rather than complying with this strategy, they would be willing to purchase government-issued special bonds at a loss (as a fine introduced by the government actually). The same person added, “Did you consult us while creating this strategy? I am obligated to protect my customers, the deposit holders.”

In conclusion, we will see if these new plans will serve as a remedy for the situation. The picture appears quite challenging, but time will tell.