The Central Bank of the United Arab Emirates and the Central Bank of the Republic of Turkey have announced the establishment of a bilateral currency swap agreement between the UAE dirham and the Turkish lira. The size of this contract has been set at around 18 billion dirhams and 64 billion lira.
The agreement aims to promote trade between the two countries to further strengthen financial cooperation between the two countries, in addition to helping Turkey's reserves following a series of interventions by the Central Bank. The agreement will be valid for three years with the possibility of extension if approved by the two countries.
The agreement was signed by UAE Governor Khaled Mohamed Balama and his Turkish counterpart, Sahap Kavioglu. "The signing of this agreement with the Central Bank of the Republic of Turkey reflects the desire of each nation to enhance bilateral cooperation in financial matters, particularly in the areas of trade and investment between the two countries," said Balama. Kavioglu said the agreement "demonstrates the commitment of the two Central Banks to deepen bilateral trade in local currencies to promote economic and financial relations between our countries".
The agreement comes at a time of revitalised trade and diplomatic relations between Abu Dhabi and Ankara. In recent months, the two countries have signed a total of ten agreements on energy, the environment, finance and trade, which is evidence of the rapprochement between the two countries after ten years of tensions.
The UAE has reaffirmed its interest in economic and trade openness towards Turkey, and as of the end of last year, the volume of trade between Abu Dhabi and Ankara stood at $7.1 billion. Turkey's imports from the UAE totalled some $2.2 billion, while its exports amounted to $4.9 billion.
In addition, the Ottoman country has implemented new measures such as the allocation of a $10 billion fund for direct investment in Turkey, according to Abu Dhabi
Developmental Holding. The currency swap deal is expected to be a significant boost to Turkey's economy and foreign exchange reserves, as its central bank's net international reserves fell below $8 billion earlier this month, the worst figure since 2002.
These rapprochements in bilateral relations come at a key moment for the Turkish economy, which is mired in a severe financial crisis with inflation figures as high as 20 %. Turkey has seen the value of the lira fall sharply due to President Recep Tayyip Erdogan's opposition to interest rates, added to the loss of foreign investment in the country and the lack of sufficient foreign exchange reserves.