Core Viewpoint - The Turkish foreign exchange-protected deposit mechanism (KKM) is set to be phased out, marking a shift towards more market-oriented macroeconomic policies while facing short-term risks to the lira and market uncertainty [1][2][3] Group 1: KKM Mechanism Overview - The KKM was established in response to the lira's significant depreciation in 2021, which saw a 44% decline against the dollar, and allowed individuals and businesses to deposit lira in special accounts with state compensation during currency depreciation [2] - Since its inception, the KKM has incurred costs of approximately $60 billion, stabilizing short-term capital outflows but increasing long-term fiscal pressure [2][3] Group 2: Policy Transition and Market Implications - The Turkish Central Bank announced that KKM accounts will no longer accept new accounts or renewals, indicating a move away from unconventional monetary policies [1][3] - The balance of protected deposits has decreased sharply from a peak of $140 billion to about $7 billion, reflecting a growing confidence in the lira and the new monetary policy framework [2][3] Group 3: Future Challenges and Investor Sentiment - The end of the KKM is expected to lead to increased exchange rate volatility and market fluctuations, with investors needing to manage currency risks in the short term [4][5] - The Turkish government aims to enhance policy credibility and attract capital inflows through tighter monetary policies and improved transparency, despite ongoing challenges such as high inflation and external economic pressures [4][5]