FX-protected lira deposit scheme to be phased out gradually

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Vice President Cevdet Yılmaz announced that the new government will fight inflation, keeping the freely floating exchange rate regime and that they will leave the exchange rate-protected deposit regime gradually.

The new vice president appointed following the 2023 elections and ex-Minister of Development in the former Justice and Development Party (AKP) governments between 2009-2015 replied to questions on the economic policies in a program on CNN Turk TV channel yesterday evening. 

FX-protected deposits

It is necessary to leave the FX-protected deposits gradually, instead of a sudden suspension, and the opposite could cause instability in the financial markets, argued Yılmaz in the program.

The FX-protected deposits may not come to an end by the end of the year, the vice president said, adding that the conditions for the suspension should be discussed. 

"Our approach is not to suspend the FX-protected deposit mechanism suddenly. We will be taking gradual steps, no one needs to worry. On the other hand, we will be taking the necessary measures so that the savings vehicles in Turkish lira will be attractive, and there will not be a tendency to flood the savings to foreign currencies." 

Inflation 

Yılmaz said inflation was one basic problem, both in the world and in Turkey but on the other side, there was the risk of recession. "We will fight inflation in its different dimensions and elements," he said and cited monetary policies, harmony between fiscal policies and monetary policies, and also sectoral policies which he said can have an effect on inflation. 

Households face the greatest problems in relation to food, rents, and energy, Yılmaz argued, and thus agriculture and food industries are strategic sectors. The two sectors will therefore be approached very comprehensively, he stated. 

According to Yılmaz, it will not be possible to have single-digit inflation in Turkey in a short time, but this will be included in the Middle Term Program of the government. (AS/PE)