Turkey’s Treasury Marks Transition With Conclusion Of FX-Protected Deposit Scheme

Turkey concluded its two-year foreign exchange (FX)-protected deposit program on January 1, marking a significant shift in its economic policies.

Treasury and Finance Minister Mehmet Simsek, appointed after President Recep Tayyip Erdoğan’s re-election in May 2023, emphasized this move as part of a broader return to economic orthodoxy. The decision follows the central bank’s notable interest rate increase, reflecting a departure from previous resistance to devalue the lira or raise interest rates.

The FX-protected deposit program, aimed at bolstering the lira and curbing the dollarization of bank deposits, guaranteed returns for Turkish residents maintaining savings in local currency. Simsek’s announcement signals a strategic shift, outlining expectations for decreasing inflation, enhancing reserve adequacy, ending the FX-protected system, initiating a permanent improvement in the current account, and establishing fiscal discipline in 2024. The move aligns with recent policy adjustments, indicating Turkey’s commitment to a more conventional economic approach.

Clever Robot News Desk 5^th January 2024