President Recep Tayyip Erdoğan said on June 13 that Turkey’s central bank had agreed with China to increase an existing currency swap facility to $6 billion from $2.4 billion, in a move that could boost foreign reserves.
Turkey’s FX reserves plunged by 75% last year, raising concerns about a possible balance of payments crisis. The surprise announcement came as the Turkish president prepared to travel to Brussels for a NATO meeting.
“We made a very important agreement recently with China, which is very important and one of our biggest trade partners,” Erdoğan said.
“We previously had a $2.4 billion swap deal. Now we have made a new deal for a further $3.6 billion, raising the total to $6 billion.”
The central bank’s FX reserves were badly depleted by a 2019-2020 policy of state bank sales of some $128 billion to support the beleaguered Turkish lira. Excluding swaps with state banks, the central bank’s FX reserves are deeply negative, official data show.
A year ago, Turkey appealed to foreign allies for new swap funding but secured little. Interest rate hikes starting in September briefly eased economic pressure, though the lira touched a new low earlier this month.
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.
Erdoğan criticized those he said insisted Turkish reserves were falling and said the new deal with China "thwarted this game of theirs."