Turkey requests funding from abroad in anticipation of a currency crisis

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Three senior Turkish officials said that the Turkish government requested assistance from its foreign allies as part of an urgent effort to raise funds, as it prepares to face what analysts fear will be its second currency crisis within two years..

They said that treasury and central bank officials had bilateral talks in recent days with their counterparts from Japan and Britain on establishing currency swap lines, and with Qatar and China on increasing the size of existing facilities..

Jawdat Yilmaz, deputy chairman of the ruling Justice and Development Party for foreign affairs, confirmed on Thursday that Turkey was seeking exchange agreements.

He told a panel discussion, “We are holding negotiations with different central banks regarding exchange opportunities,” adding “not only the United States, but there are other countries as well, but he did not mention other details.”.

This comes after the Turkish lira hit a record low last week, which limits Ankara’s ability to address concerns about its diminishing foreign reserves and its huge debt burden..

One official told Reuters that Turkey feels confident after the talks, but it is unclear how close it is to concluding agreements at a time when the Corona virus pandemic is draining the resources of governments and central banks in an unprecedented way..

The Japanese Treasury and the Japanese Treasury and the Bank of England declined to comment. The People’s Bank of China did not respond to a fax request for comment. The media office of the Qatari government did not respond to an inquiry regarding the expansion of the exchange lines with Ankara.

And if Turkey is unable to secure tens of billions of dollars in financing, analysts say it will face the risk of a currency exchange rate collapse similar to what happened in 2018, when the lira for some time lost half its value in a crisis that shook emerging markets.

The government says that its foreign exchange reserves are adequate, and this week, President Recep Tayyip Erdogan blamed the lira’s decline on “those who think they can destroy our economy, shackle our feet, and blockade the use of financial institutions abroad.”“.

The diplomatic effort coincides with the Corona Virus pandemic, which is expected to spark an economic recession.

Investors say this indicates Turkey is seeking to bypass its preferred source of funding, the US Federal Reserve, and that it may have to consider tough decisions on interest rates or options that have excluded them..

“The talks are in better shape, especially with Qatar, China and Britain … I am optimistic about providing a certain amount of resources” and an agreement “will not take long,” said one of the three officials, who asked not to be named.“.

The other two officials said that Turkey had addressed representatives of Japan about possible funding, and one of them added that the pace of the talks should be accelerated if a swap line was to be available..





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