Turkey’s FX-protected deposits scheme, known as KKM, introduced in late 2021 to stabilise the Turkish lira (TRY) and curb dollarisation, is nearing its end after costing the country an estimated $60bn, Dunya has reported. The Turkish business daily cited central bank data and state budget figures.

The programme allowed depositors to hedge against exchange rate losses while holding on to their lira.

At its peak in 2022, KKM accounted for 26.2% of all deposits, reaching $140bn. As of mid-2025, that percentage was down to just 2%, or $11.8bn.

During the scheme’s tenure, the lira experienced further sharp depreciation: it weakened by 44% in 2021, 29% in 2022, 37% in 2023 and 16% in 2024.

These losses triggered substantial KKM compensation payments from the treasury, straining the public finances.

Despite strong opposition from economists and commentators, the FX-protected deposit scheme remained in place for an extended period.

Among commentators, Mahfi Egilmez argued that the scheme merely postponed hard currency demand and eroded fiscal discipline, while Emre Alkin described it as a temporary fix that weakened both the treasury and the central bank.

Hakan Kara noted that FX-protected deposits undermined monetary policy, reducing the effectiveness of interest rate decisions.

Ugur Gurses, who previously worked at the central bank, emphasised that the KKM scheme, though denominated in lira, was effectively indexed to foreign exchange, reinforcing expectations of further depreciation.

Following the May 2023 national elections, President Recep Tayyip Erdogan pivoted toward orthodox economic policies. Interest rates were sharply increased. Inflation has dropped from 75% to 33.5%, based on official readings, paving the way for a gradual rate-cutting cycle.

Finance Minister Mehmet Simsek recently stated: “Thanks to our [KKM] exit strategy and tight monetary policy, FX-protected deposit balances are steadily declining.”

Since returns on FX-protected deposits have been capped at 40% of the policy rate, the scheme has long ceased to be a meaningful alternative to standard lira deposits.

For corporations, new FX-protected accounts and renewals were completely halted at the beginning of this year.

The central bank plans to terminate the FX-protected deposit scheme before the end of this year.