SAFAKNA TURKEY – Unlike central banks that operate with an independent mechanism in developed countries, many market experts and economists continue to comment on the Central Bank of the Republic of Turkey as the “invisible hand of the AKP in the markets.” While there has been an economic downturn on a global scale since Covid-19, many countries around the world have decided to raise interest rates one by one.
Contrary to the prevailing economic view, the CBR continues its decision to lower interest rates in Turkey, which is one of the countries with the highest inflation in the world, despite all the warnings. With the KKM system, which was implemented on December 21, 2021, it suddenly fell and fell by 6 lira in one night. However, the dollar rose more than 50 percent last year despite a KKM bid, ending the year at 18.70.
In December 2022, the 12% interest limit set by banks for protected currency deposit accounts was also lifted, the validity of which was extended for 1 year, which made investing in KKM more attractive for investors. Each increase in the amount in KKM means that more money will come from the treasury, that is, from the pocket of a citizen, even despite the suppression of the dollar.
World Newspaper contributor Alaattin Aktash, who made a name for himself with his comments on foreign exchange deposits, said: “We are in big trouble. A secure deposit in currency, presented as an invention that the whole world is jealous of. In addition to the funds transferred from the budget and the Central Bank to those who opened this account, the real disaster will happen when the implementation is completed,” he said, revealing the impasse caused by the KCM.
Here is the economist Alaattin Aktash It’s not “lyricization”, it’s “dollarization”! signature:
Invite those who prefer to hold TL with the fear that they will switch to foreign currency, even if they incur a real loss for many years, accustom them to returning foreign currency, make 650 billion, which usually stays in TL according to the current situation is indexed to foreign exchange, and then, in the name of this, also “liraization”! On the contrary, this practice is not “lyricization”, but “dollarization”…
We have big problems. A secure deposit in currency, presented as an invention that the whole world is jealous of. Apart from the funds transferred from the budget and the Central Bank to those who open this account, the real trouble will be when the implementation is completed. We wrote it over and over. Details on August 10 and 11…
Exchange-protected deposits, an application applied to prevent foreign exchange appreciation, and other measures taken along with the name “liration” were deemed appropriate for this practice. However, this practice is actually the opposite: while this practice seems to encourage holding TL, it also encourages those who have saved in TL in the past to return foreign currency. “Liraization” actually became “dollarization”…
Central Bank President Sahap Kavcioglu also talks about the importance of liraization and the distance covered in his article on the bank’s blog. It’s good that we can’t find the answer to the following question:
“What happens when this app ends?”
If we are talking about 1.5 trillion foreign currency…
According to BRSA data, the total amount of the deposit account protected by foreign currency is 1 trillion 500 billion liras as of February 10.
Recall that some details are no longer given, the data is obscured.
We do not know the maturity of the KKM account; but it is not difficult to calculate, especially since real people generally prefer three-month periods.
At the beginning, we knew how many of these accounts were opened directly in TL, how many were created through DTH conversion, then this data became undisclosed.
But it is estimated that the amount of TL and foreign currency in the total account is about half.
In the period March-July, 60.6 billion liras were paid from the budget as an exchange rate difference, and tax by 10.2 billion liras was also underpaid; Thus, KCM’s burden on the budget for five months amounted to 70.8 billion liras. (World, August 16, 2022)
But this burden is small compared to the disruption that will occur when the application is completed.
This disruption will be discovered where the money in the account will go when the application terminates.
1.5 trillion foreign currency, where is the currency?
I stated that the invoice amount on February 10 was 1.5 trillion lira. Assume that when the application is terminated, the amount remains at this level whenever it is terminated.
Half of this account, that is, 650 billion, is already in foreign currency. These individuals and organizations, who have accumulated foreign currency for years, will naturally receive foreign currency when the practice ends and they receive this money.
On the other hand, while saving TL for years, those who switched to a currency-protected account were also using foreign currency. These account holders no longer look at the interest provided by the bank when depositing money. The attention is completely on the return of foreign currency, because no matter how much interest, the return is as much as the increase in foreign currency. Almost innocently, those who stood in TL were pushed into foreign exchange. Now, while they usually save Turkish lira, those who switch to KCM and get used to this attractive foreign exchange yield will turn to Turkish lira deposits with 650 billion, well below inflation, or will they turn to foreign currency? Isn’t this a question with an obvious answer…
Therefore, even if the application for a deposit with currency protection ends today and the amount is 1.5 trillion lira, this means that Turkey will suddenly face such a demand for foreign currency.
Calculate how many billions of dollars is 1.5 trillion lira in foreign currency!
Invite a citizen who stays in TL despite the loss to KKM to “not switch to foreign currency”, cheer him up by saying “Connect your money to foreign currency”, index approximately 650 billion lira to foreign currency. , that is, in a sense, this is a currency account, 36 billion at today’s rate. collect dollars, then call it “lira”!
Even the conversion of those who open a KKM account through foreign currency will cause problems. In a sense, foreign exchange collected in installments will turn the market around when it suddenly turns into demand.
Or they will convert Turkish lira into foreign currency…
So what happens when 1.5 trillion lira says “I want foreign currency”? It turns out that we do not “get a good lyre”?
Or can we not convince the citizen to “get the lyre”?
Without thinking about it, we will write blog articles saying, “We have become one lira, one lira, so don’t ask!”
BANKS FOUND A WAY TO DOWNLOAD THE LOAD TO THE TREASURY!
For some reason, there has been a ceiling on the interest rate that banks must apply on a deposit with a guaranteed exchange rate.
Banks may apply the maximum interest rate “political interest + 3 points” to KKM. The discount rate was 14 percent when KKM started operations, so the maximum interest rate could be 17 percent. Later, when the discount rate was reduced to 13 percent, the top rate was also reduced to 16 percent.
However, most banks did not apply the 17% interest rate before and do not apply the 16% rate now. Because these rates are ceiling, and banks can lower the interest rate.
Citizens almost never look at bank interest when opening a deposit account with currency protection or renewing an account. Since the appreciation of the exchange rate is not lower than the interest rate, this rate must be important. The exchange rate appreciation is always higher, and the difference between the percentage and the exchange rate appreciation is paid by the Treasury anyway.
This happens with the treasury, and therefore with those who do not open a KCM account.
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