Turkey and the United Arab Emirates signed a $5 billion deal to boost Ankara’s foreign exchange reserves, the latest sign of warming ties between the two former main rivals.
The two central banks announced a swap deal they said was worth 18 billion dirhams ($4.9 billion) and 64 billion liras.
Khaled Mohamed Balama, Governor of the UAE Central Bank, said the agreement “reflects each country’s desire to strengthen bilateral cooperation in financial matters, especially in the areas of trade and investment between the two countries”.
His Turkish counterpart, Sahap Kavcioglu, said it showed their commitment to “deepening bilateral trade in local currencies to promote economic and financial relations between our two countries”.
Despite soaring inflation, foreign-debt-burdened Turkey has suffered another drop in foreign reserves after President Recep Tayyip Erdogan ordered a series of deep interest rate cuts in the final months of 2021.
The country’s severely negative real interest rates have weighed heavily on the Turkish lira, which has lost about 45 percent against the dollar last year. Turkish authorities spent billions of dollars in the final weeks of 2021 to stop it from freefall.
The deal – latest Inheritance of Swap Agreements The agreement signed by Turkey with the global central bank – is a borrowing agreement, not a specific investment in the country.
While that would boost the country’s reported reserves figures, Ibrahim Aksoy, an analyst at HSBC in Istanbul, said he did not expect the deal to have a “significant impact” on the lira, as market participants focused on excluding swap agreements reserve level. Once borrowed money — including swaps with other central banks — was stripped, Turkey’s net foreign reserves turned negative.
Still, Turkish officials hope that the deal heralds further investment in the Gulf state as the thaw of the once tense relations between the two countries is accelerating.
Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, promise in november When he meets Erdogan on his first visit to Ankara in nearly a decade, his country will invest $10 billion in Turkey.
Head of ADQ, Abu Dhabi’s national investment agency, told the Financial Times Earlier this month, the fund was discussing “several opportunities” in the country with Turkey’s sovereign wealth fund, including companies in its portfolio.
Turkey and the UAE have battled for influence in the region for much of the past decade in the popular uprisings that rocked the Arab world in 2011. But over the past year, both countries have begun to recalibrate their foreign policies, fueled by elections. Joe Biden’s desire to be president of the United States and boost the economy.
Sheikh Mohammed has been turning his attention to economic diplomacy as the UAE seeks to strengthen its post-pandemic recovery. Meanwhile, Erdogan has tried to lure foreign investment from the Gulf amid economic turmoil at home, and he has made recommendations to a series of former regional enemies.
Erdogan, who has also been taking action against Egypt and Israel, said he plans to travel to Saudi Arabia next month. If it goes ahead, the visit will be his first to Saudi Arabia since the murder of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in 2018, which plunged relations between the two countries into crisis.