The volume of Türkiye's foreign exchange-protected Turkish lira deposits continued its steady decline last week as authorities look to terminate the scheme, which has weighed heavily on budget, within 2025.
The deposits under the scheme, known as KKM, decreased to TL 1.11 trillion (nearly $31 billion) from TL 1.13 trillion in the week ending Jan. 3, data by the banking watchdog, BDDK, showed on Thursday.
That marked the 72nd week of uninterrupted reductions in the volume of KKM, Treasury and Finance Minister Mehmet Şimşek said.
"KKM stock has fallen from its peak of TL 3.4 trillion in August 2023 to TL 1.1 trillion," Şimşek wrote on social media platform X. “The share of KKM in total deposits decreased from 26.2% to 5.9%,” he added.”
Under the scheme, adopted in late 2021 to help reverse dollarization and counter a steep fall in lira, the central bank has been protecting deposits by covering depreciation costs.
But authorities have been seeking to phase it out gradually and transition deposits into regular lira accounts, in part by dissuading companies and individuals from renewing the KKM accounts.
Last month, Şimşek said the scheme would be terminated without creating any volatility in the markets. The central bank also announced that it would end in 2025.
"We will continue our policies that will strengthen macro-financial stability and increase confidence in the Turkish lira," Şimşek wrote on Thursday.
The lira has made a gradual recovery in real terms since its steep 2021 decline. It depreciated about 16.5% against the U.S. dollar last year, the smallest annual decline since 2020.
The weekly bulletin by the BDDK also showed banking sector's loans increased by TL 57.4 billion to TL 15.96 trillion in the week through Jan. 3.
Total deposits fell from nearly TL 19 trillion to TL 18.66 trillion. Consumer loans grew by TL 7.7 billion, reaching above TL 2 trillion. Non-performing loans rose by TL 6.2 billion to TL 293.7 billion.
