Opposition leader wows to scratch FX protected deposit scheme

According to our survey of July-August polls, main opposition leader and top presidential hopeful to face Erdogan, Mr. Kemal Kilicdaroglu is ahead of the former. Reason would suggest he will put more miles between himself and the incumbent, as inflation soars and the economy withers in the winter cold on account of a shortage of FX funding and a raging Covid-19 epidemic. Yet, even in opposition ranks many are skeptical about his chances as the next president of Turkey. While his Alevite background and lack of charisma are important reason for disrespect, a reasonable accusation is that he has no plans to improve the economy.


Kilicdaroglu can’t do much about his faith or his personality, but lately he has staged a frontal assault on Erdogan by unveiling economic measures he will adopt if he is elected.  Only September polls will show whether these initiatives are going to earn him credibility with the voters and the intelligentsia, but he sure is ruffling feathers in the presidential palace.


His latest burst is a promise not honor the FX protected deposit scheme, where the Treasury and the Central Bank pay the difference between the bank’s deposit rate and the rate of dollar appreciation against TL to the saver’s account. With over4 470 bn accumulated in these accounts called KKM,  another bout of TL depreciation against the USD could substantially raise budget deficits as well as leading to faster money supply growth. We know his wow has ruffled feathers in AKP, because the indomitable Finance Minister Nurettin Nebati took time to protest him in a press conference, complaining  that Kilicdaroglu was  undermining financial stability.


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Earlier, in a single tweet Kilicdaroglu cost Erdogan a cool $1.5 bn when he urged graduates not to pay back their student loans, because in his administration these will be restructured favorably. Within a week the Cabinet has passed a measure to forgive TL26 bn of interest on such loans, believed to be held by 5 million graduates.


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Kilicdaroglu also promised to eliminate Special Consumption Tax on first time car purchases and restructuring of farm debt.


While there are no polls to prove his outburst are attracting voter interest, party strategist believe he has Erdogan on the run  and will continue with more  gimmicks.


Two analyst PATurkey consulted don’t think Kilicdaroglu’s challenge will trigger an immediate exodus from KKM, but  maintained that if his poll ratings improve this might just be the case. Re-dollarization of deposits is almost certain to overwhelm Central Bank’s defense of TL, potentially causing a balance of payments  shock.


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.