Zaher Albik-Ankara
In an agreement that provides much needed foreign liquidity to compensate the depleted reserves and contribute to the stability of the Turkish lira, the Turkish Central Bank announced that it raised the amount of bilateral swap with Qatar from five billion dollars to the equivalent of 15 billion dollars in the currencies of the two countries.
And an analytical list of the financial position of the Turkish Central Bank said on Friday that the bank received ten billion dollars from the currency swap agreement concluded with Qatar last Wednesday.
The Turkish Central Bank said in a previous statement, that the currency swap agreement with its Qatari counterpart aims to facilitate bilateral trade in the local currency in addition to supporting financial stability in the two countries, and under the facilitation exchanges take place in Turkish lira and the Qatari riyal.
The Turkish currency fell to a barrier of 7.26 against the dollar earlier this month, an unprecedented low level as investors fear about the decline in the central bank's foreign reserves and Turkey's relatively high external debt obligations, which prompted officials to seek financing from abroad.
The Reuters news agency reported last week that officials from the Turkish treasury and the central bank opened their counterparts in Qatar and China about increasing the size of existing swap lines, and also spoke with Britain and Japan about the possibility of creating similar facilities.
The lira has risen over the past eight trading sessions for reasons, including expectations that Ankara will sign foreign agreements to allow more liquidity to stop its currency falling, similar to what happened in 2018 when the Turkish lira crisis rocked emerging markets.
After announcing the increase in the size of the currency swap agreement between Turkey and Qatar, the lira rose to 6.79 dollars on Thursday.
Currency swap
The economist at Aegean University in Izmir, Mohamed Ibrahim, says that the currency swap agreement is the process of exchanging a local currency with a foreign currency and is between the central bank of the home country with the US Federal Reserve for a limited period of time or any other central bank, and the process may take place between banks and private financial institutions In the two countries.
It is a method used by countries to increase the size of their foreign reserves and to strengthen economic relations between the two countries. The swap agreement between Qatar and Turkey - Ibrahim adds - means allowing commercial exchange in the local currencies of both countries, equivalent to 15 billion dollars.
Ibrahim mentioned to Al Jazeera Net that the amendment of the currency swap agreement between Turkey was expected, as the Turkish central bank will convert the lira in exchange for obtaining the Qatari riyal, after which it uses the Qatari riyal or converts it to the dollar according to the following:
One dollar equals 6.79 pounds
One dollar equals 3.64 riyals
One riyal equals 1.87 liras
"Currency swaps provide the state with an important source of foreign currencies, and help it fulfill its obligations towards the outside world, especially paying premiums and obligations of the external debt, thus avoiding defaulting and stopping the fulfillment of these obligations, as happened in 1994 and 2001," he said.
He pointed out that the economic researcher at Aegean University that Turkey has sought since the beginning of the crisis to reach many agreements of barter lines, but no response has yet come except to expand barter lines with Qatar to increase from five billion dollars to 15 billion dollars.
Ibrahim added, "Turkey is still seeking similar agreements with the Federal Reserve, the People's Bank of China, and the Japanese and Central Bank of England as well, as barter agreements enhance Turkey's foreign reserves and thus contribute to a better lira exchange rate well."
Observers said that the current foreign reserves of Turkey are far below the safety limit due to the effects of the Corona pandemic, and that there is a gap due to the decline in exports and the loss of tourism revenues in addition to the exit of short-term funds from Turkey.
Therefore, the barter agreement provides Turkey an opportunity to avoid borrowing from the International Monetary Fund and thus to submit to its terms, according to observers.
Economic partnership
The economic and trade relations between Turkey and Qatar have witnessed a great development in recent years, and increased in the wake of the siege imposed on Doha in June 2017, and Turkey has become one of the most polarizing countries for Qatari capital in many sectors of which tourism and real estate are the most prominent.
According to the Qatari press, the trade exchange between Qatar and Turkey recorded a growth of 49% in 2018, amounting to more than seven billion riyals ($ 1.9 billion), which reflects the strong relations between the countries of Qatar and Turkey, the growth of mutual investments and the increase of joint commercial and industrial opportunities.
In 2017, Turkey opened a commercial office in Doha with the aim of encouraging the Qatari business world to invest in Turkey, in conjunction with the escalating development in relations between the two countries.
According to the Federation of Chambers and Exchanges of the Turkish Republic, the volume of trade exchange 15 years ago was in the range of $ 15 million, and has now increased by sixty times, to reach nine hundred million dollars, while the Qatari capital invested in Turkey has increased from one million dollars to about 1.6 billion dollars.