Turkey’s government has appealed to foreign allies in an urgent search for funding, three senior Turkish officials said, as it prepares defenses against what analysts fear could be a second currency crisis in as many years, according to Reuters.
Treasury and central bank officials have had bilateral talks in recent days with counterparts from Japan and the United Kingdom on setting up currency swap lines, and with Qatar and China on expanding existing facilities, the officials said.
Cevdet Yılmaz, the ruling Justice and Development Party’s (AKP) deputy chairman for foreign affairs, confirmed on Thursday that Turkey was seeking swap agreements.
“We are having negotiations with different central banks for swap opportunities,” he told a panel discussion, adding, “It is not only the US, there are also other countries.”
The push comes after the lira hit a historic low last week, limiting Ankara’s capacity to address concerns over its depleted foreign reserves and hefty debt obligations.
One of the officials told Reuters Turkey was feeling confident after the talks. But it was unclear how close it may be to securing any deals as the coronavirus pandemic is stretching governments and central banks to the limit.
If Turkey cannot secure tens of billions of dollars’ worth of funding, analysts say it risks a currency spiral similar to 2018, when the lira briefly shed half its value in a crisis that shook emerging markets.
The government has said its forex buffer is adequate. This week, President Recep Tayyip Erdoğan blamed the lira’s fall on “those who think they can destroy our economy, put shackles on our feet, corner us by using financial institutions abroad.”
The diplomatic effort comes as the coronavirus pandemic here is expected to trigger a recession.
It suggests Turkey is looking beyond its preferred source of funding, the US Federal Reserve, and may have to consider tougher decisions on interest rates or options it has dismissed, such as IMF assistance or capital controls, investors say.
“Talks are in a better position especially with Qatar, China and Britain,” said the first senior official, who requested anonymity. “I am optimistic that a certain amount of resources will be provided” and an agreement should “not take too long.”
The two other officials said Turkey reached out to Japanese representatives about possible funding, with one adding that talks need to be speeded up if a swap line is to be secured.
The Turkish central bank’s net foreign currency reserves have dropped to $26 billion from $40 billion this year. Bankers say that was largely due to state lenders selling some $30 billion in FX markets to support the lira, which has nonetheless fallen 15 percent this year.
The country’s 12-month foreign debt obligations are $168 billion, with about half due by August, while disappearing tourism income has inflated its monthly current account deficit to nearly $5 billion.