Under the current conditions, the Turkish authorities will hardly find any lender. At the same time, multibillion loans from abroad are the only way to support the national currency market. Thus, leaders from the United Arab Emirates may somehow improve the situation.
Turkey signed a $4.9 billion currency swap agreement with the United Arab Emirates. The three-year deal will allow the country to prop up its reserves, which shrank to a negative level at the end of the previous year. The agreement may also help the central bank to support the national currency in the next 2 months. Last year, the Turkish lira depreciated by more than 50% against the US dollar, hitting a new 20-year low. The deepest slump was recorded at the end of 2021. In December, the lira slid to 18.3 against the greenback. Notably, in early 2021, the currency was trading at 7.4 versus the US dollar.
At the beginning of January, the central bank’s reserves totaled $110 billion, including funds of commercial banks, which are kept at the regulator’s accounts, and foreign currency borrowed from organizations abroad. However, the central bank does not have its own reserves. It is a usual thing for the Turkish authorities to search for money in other countries to support the lira. Interestingly, in August, Turkey signed a $2 billion swap deal with South Korea and a $6 billion swap deal with China.
