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FX scheme fuels $25 billion loss for Turkish central bank in 2023

Türkiye’s central bank registered a steep loss in 2023, mainly stemming from a foreign exchange-protected deposit scheme, official data showed on Sunday.

The loss reached TL 818.2 billion ($25.25 billion), according to the Central Bank of the Republic of Türkiye’s (CBRT) balance sheet published in the Official Gazette.

The government has been working for months to exit the scheme known as KKM, launched in late 2021 to help reverse dollarization and support the Turkish lira.

It sought to encourage people to keep their savings in lira through guarantees to compensate for losses from decline against hard currencies.

Loss stemming from the KKM prompted the central bank to pass on distributing profit to the Treasury in 2023.

The KKM accounts totaled nearly TL 2.29 trillion as of the week ending March 29, according to the Banking Regulation and Supervision Agency (BDDK).

It has been steadily declining from a record of over TL 3.4 trillion in mid-August last year.

The scheme helped reverse a trend of Turks flocking to hard currency and gold to protect savings after years of lira depreciation.

The central bank is now seeking to boost the share of lira deposits in the banking system. It started in August to urge conversion from the KKM to standard lira accounts.

An independent audit report published last year showed the central bank posted a profit of TL 72 billion in 2022 and TL 57.5 billion in 2021.

The central bank will convene its general assembly on April 30 in Ankara to discuss the 2023 results.

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