Turkey Turns to Qatar to Save Floundering Lira
Turkey secured a tripling of its currency-swap agreement with Qatar to $15 billion, the central bank said on Wednesday, providing some much-needed foreign funding to reinforce its depleted reserves and help steady the Turkish lira.
Ankara had been urgently seeking access to funds from Doha and elsewhere to head off a potential currency spiral, and analysts say tens of billions of dollars might be needed. A senior Turkish official told Reuters talks are continuing.
Turkey’s central bank said the deal with its Qatari counterpart - which raised the existing FX limit from the equivalent of $5 billion - would support financial stability and trade.
The lira touched a historic low earlier this month as investors fretted over a drop in the central bank’s net FX reserves and the country’s relatively high foreign debt obligations, accelerating Ankara’s overseas funding search.
Qatar pledged as much as $15 billion of investment and offering a credit line to backstop Turkey’s financial system at the height of its currency crisis in 2018. Meanwhile, Turkey has stationed troops and steadily built up a base in Qatar since 2017.
A third was intended for portfolio investment and another third for project finance, said Timothy Ash, a strategist at BlueBay Asset Management in London.
“I don’t think much of the $10 billion non-swap part of this agreement was disbursed, so maybe the Qataris are just rolling this into swaps,” he said, according to Bloomberg.
The higher limit on the swap deal could effectively raise Turkey’s reserves by up to $10 billion, adding to a stockpile whose size was called into question by investors because the central bank boosted them by including dollars borrowed from commercial lenders in its foreign holdings.
Authorities have been leaning on state lenders to flood the market with dollars, and finding a source of foreign exchange has become increasingly urgent with gross central bank reserves down $17 billion since the beginning of the year to $89.2 billion.
The lira was trading 0.3% lower at 6.7957 per dollar at 10:53 am in Istanbul.