Türkiye’s Top Court Annuls Treasury Transfers for FX-Protected Accounts

In a major decision with broad fiscal and constitutional implications, Türkiye’s Constitutional Court (AYM) has annulled a key provision allowing the Treasury to transfer funds to the Central Bank to support Foreign-Exchange-Protected Deposit (KKM) accounts. The court deemed the arrangement unconstitutional, citing concerns over the separation of powers and improper delegation of budgetary authority.

The ruling, which targets Article 35 of the controversial Law No. 7351, emphasized that granting the Finance Minister authority to allocate such funds bypasses the legislative branch’s exclusive power to determine public expenditures.

Court: Budget Rights Cannot Be Transferred to the Executive

According to the verdict, the clause giving the Finance Minister unilateral control over public funds, especially in the context of FX-protected deposits, violates constitutional principles. The court ruled:

“The provision results in transferring the legislature’s budgetary authority to a member of the executive, which constitutes a breach of constitutional checks and balances.”

The annulment will take effect in 9 months, giving the government time to adjust fiscal mechanisms currently tied to the KKM system.

Presidential Powers on FX Scheme Also Revoked

The court also overturned related provisions that granted the President of Türkiye broad discretion over the implementation of the KKM system. These powers included setting procedures and principles without a clear legislative framework.

The judges noted that:

“Leaving such critical regulatory matters entirely to the President contradicts the constitutional principle of the non-delegable nature of legislative powers.”

This part of the ruling reflects growing concern over the concentration of executive power under the current administration.

Court Strikes Down Restrictions on Legal Appeals in Debt Cases

In a separate but connected ruling, the Constitutional Court also nullified certain thresholds on appeals in debt-related court cases, which had prevented appeals below specific financial limits. These included:

• 7,000 TL for regional appeal (istinaf)

• 58,000 TL for supreme appeal (temyiz)

While these thresholds were designed to ease judicial burden, the court found the static monetary limits unconstitutional, especially given inflation and yearly revaluations.

The Bursa 4th Enforcement Court had challenged the fixed nature of these limits, prompting the review. As with the KKM ruling, these annulments will also enter into force in 9 months.

Implications for Türkiye’s Economic Governance

The decision marks a significant pushback against executive overreach in economic policy, especially on a scheme like the KKM, which has become both a central pillar of currency stabilization and a fiscal burden. The ruling raises serious questions about how the government will fund or reform KKM going forward, particularly if external economic shocks persist.