Turkey in swap line talks with G20 peers: Minister

Turkey in swap line talks with G20 peers: Minister

Turkey in swap line talks with G20 peers: Minister

Turkish Treasury and Finance Minister Berat Albayrak has ensured international investors that Turkey’s reserves are sufficient and Ankara has been holding swap line talks with other countries.

The country has adequate reserves to meet its engagements, he said on May 6 during a closed-door online meeting with international investors, adding that banks and the private sector were easily able to roll over their debt.

Albayrak said that the Turkish Treasury has only $4.7 billion of remaining debt, which will be rolled over in 2020.

Turkey is conducting talks to establish swap lines with members of G20, with more than one swap line possible, said the country’s treasury and finance minister.

“We are doing one-to-one swap negotiations with G20 countries with which we have a trade deficit and a free trade agreement,” he said.

Saying that it would not be appropriate to comment on the negotiations before they concluded, “it is highly possible to make swap agreements with more than one country.”

He reiterated that Turkey has no plans to negotiate a financing program with the International Monetary Fund (IMF).
In November 2019, the Turkish Central Bank and its Qatari counterpart raised the limit on the existing currency-swap arrangement to $5 billion from $3 billion. Turkey also has a currency-swap deal with China, signed eight years ago and renewed every three years.

The COVID-19 pandemic had been brought under control in Turkey and the country had begun to ease measures gradually, noted Albayrak.

Despite the decline in exports and tourism, there will be no significant change in the current account balance due to falling commodity prices, the minister stressed.

He noted that economic activity would return to normal in the second half of this year at the latest.

Regulation against manipulative acts

A new regulation by the banking regulator to prevent manipulation and misleading acts in financial markets was published in the Official Gazette, as the Turkish Lira further dropped against dollar on May 7.

The Banking Regulation and Supervision Agency (BDDK) expanded the definition of manipulative trades in financial markets. Bank trades that result in “misleading pricing” or keep asset prices at “abnormal or artificial” levels will be considered manipulative, according to a new regulation called “Manipulative and Misleading Trades in Financial Markets.” Spreading “misleading or wrong information” on financial assets will also be considered manipulative trading.

In the text of the regulation, some speculators were accused of increasing “disorder in markets by taking advantage of shallow markets or price fluctuations during offer and demand abnormalities.”

State-run Anadolu Agency on May 6 accused financial institutions in London of “manipulative attacks” on the lira. The agency claimed the move had been timed to coincide with Albayrak’s call with investors.

On May 7, the lira weakened to its fell to a record low of 7.25 per U.S. dollar, while some traders pointed to claims of declining possibility of a swap line between the central banks of Turkey and the U.S. The lira recovered some of its losses in the afternoon to 7.10 against the greenback.

Meanwhile, the BDDK on May 7 blocked three foreign banks – BNP Paribas, Citibank, and UBS – from doing foreign exchange transactions with the lira.

Turkey bars 3 foreign banks from FX transactions
Turkey bars 3 foreign banks from FX transactions

Those banks failed to complete their lira commitments and so defaulted, said the BDDK. The move will prevent “transactions and applications that might endanger the operation of banks” as well as ensure the credit system works effectively, it added.