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Turkey extends forex-protected lira deposit scheme for a year

Turkey lira Reuters
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Turkey has extended by a year a scheme that it had adopted in the throes of a 2021 currency crisis, which protects lira deposits from depreciation versus hard currencies.

A presidential decree published in Saturday’s official gazette amended the deadline for opening new so-called KKM accounts to December 31, 2023.

President Tayyip Erdogan’s government introduced the state-backed scheme in December 2021 to stem a historic lira collapse triggered by interest rate cuts that Erdogan had sought. The lira has still lost 29 percent versus the dollar this year but has held mostly stable since August.

Turkish budget payments into KKM stood at 9.3 billion lira ($500 million) in September.  

Earlier, Turkey’s central bank governor Sahap Kavcioglu said the bank will continue increasing its foreign currency reserves.

Forex reserves have dropped sharply in recent years due to market interventions and in the wake of a currency crisis last December. The lira lost 44 percent of its value against the US dollar last year and another 29 percent this year.

The central bank’s recent data has shown a recovery in reserves after they touched a 20-year low in July.

In addition, the central bank is expected to keep its policy rate unchanged next week, a Reuters poll has shown.

The central bank has lowered its one-week repo rate by 500 basis points in four months in an easing cycle that it said was necessary given signs of an economic slowdown, despite inflation which stood at more than 84 percent in November.