The coin failed to protect the protected TL

While the Protected Deposit Currency (KKM) accounts, which the government launched last year to control the dollar, reached 1.4 trillion lira, they were not enough to protect the Turkish lira. After 1 year, the dollar returned to the same level and KKM, which lowered the dollar overnight, imposed a huge burden of 91.5 billion lira on the Treasury, that is, on the citizens. In the same period, the amount of payments made by the Central Bank due to KKM has not yet been disclosed to the public. On December 20, 2021, the dollar fell to 10.1565 lira with the KKM shock effect, which was put to use when the dollar rose to 18.7658 lira. However, it could not be maintained at these levels. Despite all the measures taken by the economic administration to keep the exchange rates under control throughout the year, the loss of TL against the dollar exceeded 33 percent. This loss made TL the second largest losing currency among developing countries. The Argentine peso, for its part, ranked first with a 41% depreciation against the dollar.

OUT OF CONTROL

The economic administration, which disabled interest policy, resorted to a series of additional measures when inflation spiraled out of control and climbed to 85.5 percent. To fully realize the base effect-induced decline in inflation, TL depreciation had to be kept low. The Central Bank (CBRT) and the Banking Regulation and Supervision Agency (BDDK) have enacted regulations that have practically locked down the real sector and the financial system for the past two months to prevent further depreciation of the TL. Analysts interpreted this process as the suspension of the free market, while the risk of banks increased. In this way, the dollar has been moving in the band of 18.60-18.66 lire with a controlled and very limited rise for two months.

Dollarization 67.7 percent

Since the flat course of the dollar exchange rate has not generated foreign exchange income for the last two months for those who keep their money in KKM, it gradually loses its attractiveness. The rate of increase of the KKM, which reached 1.46 trillion lira ($79 billion), stopped from November. The direction of savings in these accounts is being carefully watched. For now there is no transition to foreign currency, but analysts point out that the trend towards the stock market has increased, which has become the only investment alternative against inflation. According to BRSA data, as of December 9, KKM’s share of total deposits was 17 percent. The weight of deposits in foreign currency decreased to 49.2 percent. However, economists, who claimed that the KKM should be accepted as a foreign currency since it is under some kind of foreign currency indexing practice, calculate that dollarization has risen to 67.7 percent.