After years of adventurism in the Middle East and eastern Mediterranean, Turkey is repairing shattered ties with its neighbors. In return, the Gulf states – including former rivals like Saudi Arabia and the United Arab Emirates – have relieved Turkey’s ailing central bank through currency swaps and direct deposits. But are these aid measures enough to reverse Turkey’s fate?
Turkey has become a top destination for wealthy golf tourists, bringing much-needed dollars to the country’s economy. But tourism accounts for only a fraction of the capital pouring in from the Middle East.
Between 2016 and 2019, Qatar increased its investments in Turkey by almost 500%, overtaking countries like Germany and Russia as the second largest foreign direct investor.
A détente policy towards Saudi Arabia and the United Arab Emirates began in 2022, allowing Turkey to secure multi-billion dollar deals with its former rivals.
“Turkey has large gross external financing needs, which are essentially demand for dollars,” said Timothy Ash, emerging markets strategist at BlueBay Asset Management.
“It was logical to go abroad. Go abroad and try to find someone to give them the dollars.”
Since 2019, Turkey’s central bank has spent more than $100 billion to keep the lira afloat due to an ongoing currency crisis.
The Gulf States offered remedies, either in the form of currency swap lines or direct deposits. However, critics warn that these short-term measures to increase foreign exchange reserves may not cure the country’s chronic problems.
“Turkey is spending more than it can and should. It borrows money from the so-called friendly countries to finance its short-term capital needs. Of course, it can’t stay that way for long,” said Bilge Yilmaz, chief economist of the opposition Good Party.
Watch the video above to understand why Turkey needs money from the Gulf.
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