Turkey is scrambling all over to avert  currency crisis

Saudi Arabia will place a $5 billion deposit at Turkey’s central bank “within days,” the kingdom’s finance minister, Mohammed al-Jadaan, said on Wednesday, relieving some pressure of the beleaguered TL.  More help might be underway from President Erdogan’s close pal Putin:


Turkey will host talks with a Russian delegation in Ankara on Friday to seek discount of more than 25% for the price of its gas imports from Russia, senior Turkish officials said, heralds Bloomberg.


A deal with Russia could ease the pressure on the lira, one of the world’s worst-performing currencies over the last year, and help President Recep Tayyip Erdogan avoid hiking energy prices ahead of elections next year to boost his popularity at a time when Europe is facing an energy crunch.


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A Saudi finance ministry spokesman told Reuters on Nov. 22 that the two states were in “final discussion” on the deposit, yet the maturity of the deposit and potential restrictions on its utilization by Turkey’s Central Bank –for instance—to defend the TL are yet to be disclosed.


The momentum of talks between the countries’ central banks comes after Ankara and Riyadh’s joint effort to mend ties that were ruptured after the murder of Saudi journalist Jamal Khashoggi in 2018 at the kingdom’s Istanbul consulate.


Opposition press in Turkey had claimed that a deal had been cut between Turkey’s monopoly NG importer and grid operator BOTAS and Gazprom, but was kept secret to prevent backlash from the opposition.  Jading by the Bloomberg news, this is not true. However, some economists PATurkey had interviews on this subject, suggest the strength of Central Bank FX reserves despite high trade deficits printing at $8 bn in November were due to BOTAS deferring payments to  Gazprom.


Erdogan wants to cut interest rates further going into 2023 elections, as well as stoke another credit boom to maximize his chances. Both moves will technically weaken the Turkish currency, via higher inflation and current account deficits. However, Erdogan also needs stable TL going into the elections, because many voters judge the success of economic policy by the strength of the currency.


Despite  financial aid in various forms from Russia, Qatar, Saudi Arabia and potentially Azerbaijan, economists remain skeptical about Central Bank’s capacity to defend the currency until 2023 elections.


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.