Turkey’s swap deal with the UAE is a boost, but won’t solve the lira’s underlying problems

Turkey’s swap deal with the UAE is a boost, but won’t solve the lira’s underlying problems
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Updated 21 January 2022

Turkey’s swap deal with the UAE is a boost, but won’t solve the lira’s underlying problems

Turkey’s swap deal with the UAE is a boost, but won’t solve the lira’s underlying problems
  • Agreement is valued at $4.9 billion
  • Comes ahead of Turkey's President Erdogan planned visit to Abu Dhabi in February

ANKARA: At a time when Ankara is searching for foreign resources and facing unprecedented inflation rates, Turkey’s currency swap deal with the UAE is a much-needed confidence boost for the country’s economy.

However, analysts have warned that this deal alone will not solve the underlying problems facing the lira. 

The two nations have signed a three-year agreement worth $4.9 billion, including finance and trade relations.

Securing foreign swap lines are expected to fuel Turkey’s much-needed foreign currency reserves. 

“While this is a good vote of longer-term confidence in the Turkish economy, the currency swap will not address the roots of Turkey’s economic challenges. Many of these challenges are linked to nonconventional economic policy decisions,” Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington, told Arab News.

According to Mogielnicki, the currency swap puts some cash behind recent efforts to improve strained relations between the UAE and Turkey.

“The UAE is likely interested in using the currency swap to better position Emirati firms and investors to engage with Turkish markets as well as to support foreign policy objectives,” he said. 

Noting that currency swaps reduce dependency on a third currency and thus avoid fees arising from exchange rate volatility and transfer costs, Mogielnicki said that this move paves the way for greater trade and investment between countries.

“The broader MENA region is unlikely to be worse off because of the currency swap, but I don’t view this agreement as especially significant for the region,” he added. 

Enver Erkan, the chief economist of Tera Investment in Istanbul, welcomes the swap agreement with the UAE as a positive step towards increasing the gross foreign exchange reserves held by the Turkish Central Bank.

 “We, on the other hand, also consider the economic landscape in terms of net reserves excluding swaps. While net reserves are around $8 billion under the current circumstances, there is a negative picture of minus $56 billion in net reserves excluding swaps,” he told Arab News. 

Talks between Turkey's central bank and its counterpart in Azerbaijan on securing a possible currency swap line are also ongoing. 

Swap agreements are mainly used by countries that conduct large-scale trade relations between each other to finance part of these relations to be paid in local currencies.

Turkey already has some swap deals with China, Qatar and South Korea worth about $23 billion.

With this latest currency swap agreement, the Turkish Central Bank's total swap figure with foreign central banks reached $28 billion.

The swap agreement with China in 2012 and subsequent arrangements have permitted Turkish companies to pay for imports from China using yuan.

The agreement between Turkish and Emirati Central Banks will be valid for a period of three years, with the possibility of being extended further. 

Emre Peker, European director for political risk consultancy Eurasia Group, thinks the swap agreement will not have a material impact on Turkey's economy, but it will help Turkish companies trading with the UAE on the margins. 

“It is not a game changer, but will alleviate some financing pressures, considering that the swap covers Turkey's average annual exports to the UAE,” he told Arab News. 

The agreement comes ahead of a trip by Turkish President Recep Tayyip Erdogan to Abu Dhabi in February as part of Turkey’s moves to repair ties and concentrate on the economy.

Mustafa Sentop, Speaker of the Grand National Assembly of Turkey, told the Emirates News Agency the visit is “going to be a testament to the improved ties between our countries.”

"We believe that the leaders of Turkey and the UAE standing next to each other will deliver an important message on its own. The objective is to further strengthen the bilateral relations. There are mutual efforts to conclude new agreements and to renew previous commitments to cover a wider range in our current cooperation," he added.

According to the Emirates News Agency, the UAE is Turkey’s top trading partner among the Gulf Cooperation Council countries, with trade between the two countries US$8 billion in 2020. 

Sentop said the trade in the first 10 months of 2021 had amounted to US$6.4 billion.lira


Diriyah Gate will contribute $7.2bn to Saudi GDP, says Abdullah Taibah

Diriyah Gate will contribute $7.2bn to Saudi GDP, says Abdullah Taibah
Updated 14 sec ago

Diriyah Gate will contribute $7.2bn to Saudi GDP, says Abdullah Taibah

Diriyah Gate will contribute $7.2bn to Saudi GDP, says Abdullah Taibah

RIYADH: Saudi Arabia’s historic city development project, The Diriyah Gate, will contribute SR27 billion ($7.2 billion) to Saudi Arabia’s gross domestic product upon its completion, according to Abdullah Taibah, senior advisor to CEO, the Royal Commission for Riyadh City. 

While talking at the Saudi-Thai Economic Forum on May 16, Taibah said that the project will also create around 120,000 jobs, and will surely emerge as one of the most popular destinations in Saudi Arabia. 

Known as Saudi’s cultural capital, Diriyah is located just 20 minutes northwest of Riyadh’s city center. The plan is to transform the historic city into one of the world’s leading “lifestyle destinations for culture and heritage, hospitality, retail, and education,” according to a government website. 

Taibah spoke of some of the other ambitious projects that are set to transform the Kingdom into a land of global attraction as Saudi moves ahead with achieving Vision 2030 goals.  

Calling the King Salman Park, the “Lungs of Riyadh,” he revealed that this site will have plenty of green space, with lots of arts and sports activities. 

Talking about the Qiddiya project, Taibah said, “This place will be developed over 316 square km. It will include eight family-friendly theme parks. It will include the longest Formula One track of about 7.8 km and it’s supposed to be attracting 48 million visitors.” 

He added that the Riyadh Art project will install more than 1,000 public art installations from local and international artists. 

Talking about improving city transport infrastructure, Taibah noted that the King Abdulaziz metro project will cover 176 km in Riyadh with 85 stations. 

“These stations will be spread around the city covering the most populated areas connecting King Khalid (International Airport) from the north, all the way to King Abdullah Financial District and other populated areas,” he added. 

 


Bahraini oil refineries’ profit margin rises to an all time high, oil minister tells Asharq

Bahraini oil refineries’ profit margin rises to an all time high, oil minister tells Asharq
Updated 7 min ago

Bahraini oil refineries’ profit margin rises to an all time high, oil minister tells Asharq

Bahraini oil refineries’ profit margin rises to an all time high, oil minister tells Asharq

RIYADH: The profit margin of Bahraini oil refineries has risen to its highest historical level in the industry, the country's minister of oil and gas said in an interview with Asharq.

Mohammed bin Khalifa bin Ahmed Al-Khalifa also added that Bahrain Petroleum Co. refinery’s expansion is over 80 percent complete. 

Expansion of the main oil refinery is in progress which will raise the total capacity to around 400,000 barrels per day, he added. 

The Bahrain Petroleum Co. refinery expansion project will raise the current production capacity from 267,000 barrels to 360,000 barrels per day, according to Asharq.

Bahrain has more than 30 trillion cubic feet of gas reserves, and imports about 80 percent of its crude oil from Saudi Arabia.


Saudi crude oil exports fall 1% in March, biggest monthly decline in year: JODI

Saudi crude oil exports fall 1% in March, biggest monthly decline in year: JODI
Updated 12 min 14 sec ago

Saudi crude oil exports fall 1% in March, biggest monthly decline in year: JODI

Saudi crude oil exports fall 1% in March, biggest monthly decline in year: JODI

Saudi Arabia's crude oil exports fell by 72,000 barrels per day (bpd), or 1 percent month-on-month in March, data from the Joint Organisations Data Initiative, also known as JODI, reveal. 

Exports decreased to 7.235 million bpd from 7.307 million bpd in February. The decline is the biggest since March 2021 when exports fell 3.5 percent.

The volume of crude oil output has continued to grow for the eleventh month in a row. 

The output grew by 75,000 bpd in March to 10.300 million bpd. Production rose by 0.7 percent from 10.225 million bpd in February. 


Wheat prices hit record high after India export ban

Wheat prices hit record high after India export ban
Updated 31 min 58 sec ago

Wheat prices hit record high after India export ban

Wheat prices hit record high after India export ban

Wheat prices surged to a record high on Monday after India decided to ban exports of the commodity as a heatwave hit production.

The price — which was already high in the wake of Russia’s invasion of major wheat exporter Ukraine — jumped to 435 euros ($453) per ton as the European market opened.
 


Shares in Saudi Tadawul gain despite a decline in profits

Shares in Saudi Tadawul gain despite a decline in profits
Updated 46 min 21 sec ago

Shares in Saudi Tadawul gain despite a decline in profits

Shares in Saudi Tadawul gain despite a decline in profits

RIYADH: Saudi Tadawul Group’s stock gained in the afternoon trading session on Monday, despite the company posting lower first-quarter profit yesterday.

As of 2:04 p.m. Saudi time, the Kingdom’s bourse operator had seen its shares rise 3.15 percent to SR209.80 ($56), up from SR203.2 at the previous close.

The company reported lower profits yesterday, dropping 21 percent to SR141 million in the first quarter, from SR180 million for the same quarter last year.