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Erdogan says Turkey has raised FX swap deal with China to $6 billion

06/13/2021 | 09:58am EDT
Turkish President Tayyip Erdogan gives a statement before traveling to Brussels for a NATO summit at Ataturk Airport in Istanbul

ISTANBUL (Reuters) - President Tayyip Erdogan said on Sunday that Turkey's central bank had agreed with China to increase an existing currency swap facility to $6 billion from $2.4 billion, in a move that could boost foreign reserves.

Turkey's FX reserves plunged by 75% last year, raising concerns about a possible balance of payments crisis. The surprise announcement came as the Turkish president prepared to travel to Brussels for a NATO meeting.

"We made a very important agreement recently with China, which is very important and one of our biggest trade partners," Erdogan said.

"We previously had a $2.4 billion swap deal. Now we have made a new deal for a further $3.6 billion, raising the total to $6 billion."

The central bank's FX reserves were badly depleted by a 2019-2020 policy of state bank sales of some $128 billion to support the beleaguered Turkish lira. Excluding swaps with state banks, the central bank's FX reserves are deeply negative, official data show.

A year ago, Turkey appealed to foreign allies for new swap funding but secured little. Interest rate hikes starting in September briefly eased economic pressure, though the lira touched a new low earlier this month.

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.

Erdogan criticised those he said insisted Turkish reserves were falling and said the new deal with China "thwarted this game of theirs".

(Reporting by Tuvan Gumrukcu and Jonathan Spicer; Editing by David Goodman and Gareth Jones)

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
BANK OF CHINA LIMITED 0.00% 2.7 End-of-day quote.1.89%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) -0.03% 6.46265 Delayed Quote.-0.47%
US DOLLAR / TURKISH LIRA (USD/TRY) -0.86% 8.36167 Delayed Quote.13.57%
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