The Central Bank of United Arab Emirates (CBUAE) and Central Bank of Turkey have signed a nearly $5 billion bilateral currency swap agreement in both national currencies.
The agreement was signed by Mr. Khaled Mohamed Balama, Governor of the CBUAE and Prof. Sahap Kavcioglu, Governor of the Central Bank of the Republic of Turkey.
According to the Turkish Central Bank, the deal is aimed at strengthening bilateral trade and improving financial cooperation between the two countries. The nominal size of the three-year deal is $4.9 billion or 64 billion Turkish liras.
Prof. Sahap Kavcioglu, stated that, “This agreement demonstrates the two central banks’ commitment to deepen bilateral trade in local currencies in order to advance economic and financial relations between our countries.”
“Signing this agreement with the Central Bank of the Republic of Turkey reflects each nation’s desire to enhance bilateral cooperation in financial matters, particularly in the fields of trade and investments between the two countries,”
The agreement follows the earlier visit by Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan to Turkey, a meeting in which Prof. Kavcioglu held preliminary talks with UAE officials on a swap deal.
Since a series of currency market interventions in 2019-2020, Turkey’s foreign reserves have been thin, in which $128 billion was sold via state banks by the central bank.
Turkey’s central bank has swap deals worth about $23 billion with China, Qatar and South Korea.
A Bilateral Swap Agreement (BSA), or cross-currency swap agreement, gives a recipient party the right to exchange currencies with a counterparty at a fixed interest rate. BSAs are often used to both reduce the risk of currency fluctuations in times of financial volatility as well as a tool with which to lubricate cross-border trade.