Many observers believe that the Central Bank of Turkey is using local foreign exchange swap channels to inflate its foreign exchange reserves. The Turkish currency hit an all-time high earlier this month as investors feared the Central Bank`s net foreign reserves and Turkey`s relatively high external debt liabilities, leading officials to seek foreign financing. Since the end of January, net reserves have decreased by almost $10 billion per month, adjusted for a change in the CBRT`s position…. The $10 billion increase in swap lines gives Turkey an extra month (without further policy changes) t.co/KGlgrc1K2P Gurses after sharing data showing that Turkey is no longer one of the top 20 currencies widely used in international transactions, said: “The Turkish lira is now a seriously injured currency in terms of international validity and use.” The previous agreement, worth $3 billion, was signed in August 2018, after Qatar promised a $15 billion investment package for Turkey. Since the last local elections, the Turkish authorities have tried to strengthen the national currency and prevent its devaluation, but efforts have not been effective because of the cost of the country`s expansionary foreign policy, the continued decline in interest rates and the spread of coronavirus. The health and economic crisis caused by COVID-19 is forcing the Turkish regulator to extend measures to preserve the value of the currency. Turkey and Qatar`s central banks have raised the foreign exchange limit from $5 billion to $15 billion, as announced on Wednesday by the Central Bank of the Republic of Turkey (CBRT), while Finance Minister Berat Albayrak said that Turkey would more efficiently carry out local currency swaps in the coming period and found that the country would make significant profits in all areas during the second half of the year. The swap agreement with Qatar will strengthen Turkey`s depleted foreign exchange reserves by up to $10 billion. Last year, following an official visit by President Recep Tayyip Erdogan, the Turkish and Qatari central banks agreed to increase the volume of a monetary sweaquage agreement to $5 billion. Economist Cem Baslevent, a professor at Istanbul`s Bilgi University, doubts the new deal with Qatar is aimed at facilitating bilateral trade, as Turkish exports to the Gulf monarchy are worth only $1.2 billion and imports are even lower, he said on his Twitter account. “The new era will be a process in which we will achieve swap agreements in local currencies much more efficiently,” Albayrak said at the meeting of the Union of Turkish Chambers and Commodity Exchanges (TOBB). In 2018, at the height of the currency crisis in Ankara, Qatar pledged $15 billion in investments in Turkey to support its ally`s economy.
Analysts say that if Turkey fails to secure tens of billions of dollars in financing, it will risk the fall of its currency, as happened in 2018, when the lira briefly lost half its value in a crisis that shocked emerging markets. Turkey has moved away from its preferred source of dollar financing, the United States.