Turkey is initiating talks with other Group of 20 nations to get its central bank included in swap lines like those the U.S. has extended to other emerging economies, according to people familiar with the efforts.
During a call with Donald Trump on March 31, Turkey’s President Recep Tayyip Erdogan floated the idea that the U.S. Federal Reserve should expand its swap agreements to include Turkey’s monetary authority, the people said, asking not to be identified as the matter hasn’t yet been made public.
Representatives of Turkey’s presidency, treasury and the central bank, as well as the White House and Fed, declined to comment.
Since the Trump call, Turkish authorities have been talking to other G-20 central banks to be included in arrangements that allow monetary authorities to exchange currencies, the people said. The talks have yet to yield a concrete result but they underscore Turkey’s efforts to get foreign currency pumped into its $750 billion economy since the coronavirus pandemic roiled financial markets.
Finding a source of foreign exchange has become increasingly urgent with gross central bank reserves down almost $17 billion since the beginning of the year to $89.6 billion, as authorities have been leaning on state lenders to flood the market with dollars.
Stripping out banks’ required reserves and other liabilities, the foreign-currency stockpile stood at $26.4 billion as of Thursday. According to the latest official data in February, $25.9 billion of the total was borrowed money.
Turkey signed swap agreements with the central banks of Qatar and China. The agreement with Qatar at the height of a currency rout in 2018 provided $3 billion in inflows from the Gulf state. The deal’s size was increased to $5 billion last year.
China’s central bank transferred $1 billion worth of funds to Turkey in June, the first time the nation received such a substantial amount under the lira-yuan swap agreement with Beijing that dates back to 2012.
So far, Turkey’s has carefully avoided the International Monetary Fund and any discussion of funding under its emergency Rapid Financing Instrument or a standby agreement, the people said. However, Turkish officials do not rule out the possibility that the IMF might play a role in bilateral swaps agreements with other central banks or provide assistance under an emergency lending mechanism.
Seeking an IMF bailout would be a reversal for Erdogan, who has repeatedly said Turkey “closed that chapter.” Policy makers in Ankara at present see no need for a deal with the fund, though it could be politically easier in the current crisis environment.
The IMF has left the door open to possible support.
“We have a very constructive engagement with the whole membership, including Turkey,” the fund’s managing director, Kristalina Georgieva, said Thursday.
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