ANKARA — Talks between Turkey’s central bank and counterparts in Azerbaijan and the UAE on securing a possible currency swap line are wrapping up and one deal is likely before year-end, two officials with knowledge of the matter told Reuters.
Turkey is in need of such foreign currency to provide a buffer against a fast-moving lira crash and inflationary spiral, and to bolster the central bank’s depleted reserves after its expensive market interventions.
Turkey’s central bank – which has sought foreign swap lines in the last two years with some success – declined to comment on the state of talks with Azerbaijan and the United Arab Emirates.
The Azeri and Emirati central banks did not immediately respond to requests for comment on Thursday.
In June Reuters reported, citing sources, that the Turkish central bank was close to securing a deal with Azerbaijan, which is among Ankara’s closest allies.
The size of any potential swap line was unclear. No final agreement had been reached, said the sources, who requested anonymity.
“A deal with Azerbaijan is almost complete. Swap agreements will contribute positively in this period (and) talks with several countries continue,” a senior Turkish official said.
The second source said that the initial amount of the swap deal with Azerbaijan could be small but gradually rise.
“Talks with the UAE are also at an advanced stage … The possibility for one of these to be signed before year-end is very high,” the person said.
Turkey and the UAE have taken recent steps to ease badly strained ties in the wake of the 2011 Arab Spring uprisings, primarily over the role of Islamist groups in the tumult. The countries were also on opposite sides of the conflict in Libya.
Last month, Turkish Central Bank Governor Sahap Kavcioglu met UAE officials in Ankara for preliminary talks on a potential swap agreement and they agreed to improve cooperation.
The central bank has swap deals with China, Qatar and South Korea worth about $23 billion. They encourage trade in local currencies and boost the central bank’s gross reserves.
In an attempt to slow a historic crash in the lira, the central bank has announced five direct market interventions this month that bankers say totalled as much as $10 billion. The lira rebounded sharply this week from record lows.
Turkey had also previously sought deals with central banks in the United States, Britain, Russia and Malaysia, Reuters has reported. The Turkish central bank’s reserves remain depleted after a series of interventions in 2019-2020 in which some $128 billion was sold via state banks.
(Editing by Jonathan Spicer and Catherine Evans)