Turkey is initiating talks with other Group of 20 nations to get its central bank included in swap lines like those the US 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 US 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 G20 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 $750bn 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 $17bn since the beginning of the year to $89.6bn, 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 $26.4bn as of Thursday. According to the latest official data in February, $25.9 billion of the total was borrowed money.
China’s central bank transferred $1bn 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.
Policymakers 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 on Thursday.
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