Turkey’s Central Bank has received $10 billion from a currency swap agreement it secured with Qatar on Wednesday, according to the bank’s analytical balance sheet on Friday. The bank announced on Wednesday it struck a deal to increase its currency-swap agreement with Qatar to $15 billion from five billion dollars, providing some much-needed foreign funding to reinforce its depleted reserves and shore up the Turkish lira.
Ankara had urgently appealed to Qatar and China about expanding existing swap lines, and to the United Kingdom and Japan about possibly establishing them. As Turkey ran down its hard currency buffers this year, it lobbied Group of 20 nations to be included in swap lines like those the US has extended to other emerging economies.
The government has been on ongoing negotiations with G20 nations since April 10, without reaching any solution. So far unable to reach arrangements with the central banks of G-20 nations, Turkey resorted to Qatar. The agreement between both countries was concluded in 2018, when the lira lost 40 percent of its value.
Analysts attributed the swap negotiation crisis between the Turkish central bank and other central banks to the Turkish central bank’s lack of independence. The US Federal Reserve has refused to negotiate with the Turkish Central Bank due to Erdogan’s continued interference in the bank’s policies.
President of the Federal Reserve Bank of Richmond Thomas Barkin earlier stated that the Federal Reserve had swapped lines with countries that have a relationship of “mutual trust” with the United States and the highest credit standards.
It has opened the taps for central banks in 14 countries to access dollars. These are Australia, Brazil, South Korea, Mexico, Singapore, Sweden, Denmark, Norway and New Zealand, Canada, England, Japan, Switzerland, and the European Central Bank.
In this context, Turkey’s Banking Regulation and Supervision Agency (BDDK) has announced it would exempt Euroclear Bank and Clearstream Banking from recently-imposed limits on lenders’ lira transactions with foreign financial institutions. This step is aimed at protecting the clearing of lira-denominated bonds and Sukuk and ensuring Turkish lira securities are traded efficiently, the BDDK noted.
The country’s 12-month foreign debt obligations are $168 billion, with about half due by August, while disappearing tourism income has inflated its monthly current account deficit to nearly $5 billion.
Last week, the Central Bank lowered its one-week repo rate by 50 base points, in line with market expectation. A statement said the bank’s Monetary Policy Committee had decided to reduce the policy from 8.75 percent to 8.25 percent.
Since the beginning of this year, the bank has cut the rate by a total of 375 basis points. In 2019, the bank reduced the rate gradually by 1,200 basis points to 12 percent from 24 percent.
SOURCE: ASHARQ AL-AWSAT