Turkey has stepped up negotiations to conclude an FX swap agreement, and the deal with Azerbaijan is likely to be the first, Report informs via Reuters.
On Tuesday, Turkish Central Bank Governor Sahap Kavcioglu told a meeting with banks that Turkey was in talks with four countries on FX swap deals and at “a very good point” with two of those, according to two participants.
Earlier this month, President Tayyip Erdogan said Turkey had agreed with China to increase an existing currency swap facility to $6 billion from $2.4 billion. Last year, Turkey also tripled its swap agreement with Qatar to $15 billion.
The sources, speaking on condition of anonymity, said that talks were underway with Malaysia, South Korea, Russia, Britain and other countries in Asia on securing swap agreements, with a senior source saying Ankara may also further expand the accord with Qatar.
“There have been talks with South Korea and Russia on swaps for some time. Azerbaijan and Malaysia are also among the important countries with which talks are underway,” the senior source said. “There may be a swap agreement with one or more of these,” the person said.
Another source said that of the countries Turkey was holding talks with to secure a currency-swap agreement, Azerbaijan was “the closest to a deal”.
“Both Turkey and Azerbaijan have a positive approach to this agreement,” the person said.
Turkey’s foreign reserves plunged by 75% last year, raising concerns about a possible balance of payments crisis, which the government has dismissed.
Reserves were depleted by a 2019-2020 policy of state bank sales of some $128 billion support the lira currency. Excluding swaps with local banks, the central bank’s own FX reserves, which have risen in recent weeks, are deeply negative by some $60 billion, calculations based on official data show.
A year ago, Turkey appealed to foreign allies for new swap funding but secured little. Last June, the central bank said it had used its funding facility for Chinese yuan for the first time under the prior swap agreement with the People’s Bank of China.
Interest rate hikes starting in September briefly eased the economic pressure, though the ailing lira has been hovering around record lows in recent weeks.
The lira, which stood at 8.6450 to the US dollar when the Reuters report was published, firmed some 0.3% to beyond 8.61.