Turkey makes major effort to shore up lira, reserves

Turkey is in talks to secure currency swap agreements with four countries and is close to a deal with two of them, Central Bank Governor Sahap Kavcioglu said at a meeting with bank managers on Tuesday, according to two participants.

Earlier this month, President Tayyip Erdogan said Turkey had agreed with China to increase an existing currency swap facility to $6 billion from $2.4 billion. Last year, Turkey also tripled its currency-swap agreement with Qatar to $15 billion.

Kavcioglu did not specify which countries Turkey was in talks with, but said during a meeting with managers of banks in the Turkish Banks Association (TBB) that it was at “a very good place” with two central banks, the participants told Reuters.

Turkey’s foreign reserves plunged by 75 per cent last year, raising concerns about a possible balance of payments crisis, which the government has dismissed.

Kavcioglu said the central bank was committed to its goal of strengthening its reserves, the participants said.

A year ago, Turkey appealed to foreign allies for new swap funding but secured little. 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.

Interest rate hikes starting in September briefly eased the economic pressure, though the ailing lira has been hovering around record lows in recent weeks.

In a statement, the TBB said Kavcioglu and the bank managers had exchanged views regarding the second half of the year in a “productive and useful” meeting.