Turkey is a result of the ongoing negotiations for a long time today, the first foreign-per swaps (swaps) has announced that the agreement with Qatar. The not get a positive response from the United States and the International Monetary Fund (IMF) is also a door while explaining that Turkey will play the United Kingdom, Japan, Qatar and opinion was reflected in the press reports that for the swap deal with China.
Central Bank of the Republic of Turkey (CBRT) a statement by the Central Bank of Qatar signed on August 17, 2018 today bilateral currency swap (swap) announced that it has renewed the agreement. The CBRT stated that the amount of the agreement in question has been increased from the Turkish lira equivalent of 5 billion US dollars to the Turkish lira and the Qatar rial for 15 billion US dollars.
We summarize Turkey’s quest swap the four questions.
one) What is a swap?
The Turkish equivalent of swap is swapped or exchanged. currency swaps in the financial markets, interest rate swaps and cross currency swaps are three types of swaps to be but the first of them in Turkey’s agenda, ie the currency swaps.
Spinn Consulting Co-founder and economist Özlem Derici Şengül, who spoke to Sozcu.com.tr, makes the following definition:
“It is the two parties exchanging different currencies with a specified interest with a certain maturity. At the end of the term, the transaction is reversed and the money is returned to the central banks of the countries to which they belong. ”
Fatih Ozatay
2nd) Why Turkey needs a swap deal?
The Central Bank of Turkey (CBT), according to data released today by the end of March 2020, Turkey’s short-term (maturity of less than 1 year) external debt of 168.9 billion US dollars level. Of this, 121.6 billion dollars belong to the private sector and 47.3 billion dollars to the public.
Speaking Sozcu.com.tr’y Turkey Economic Policy Research Institute (TEPAV), Consultant and former Central Bank Deputy Chairman Prof. Dr. Fatih Özatay, corona virus outbreak that fall due and therefore expressed an increased need for external financing to make foreign debt payments, the foreign exchange earnings of developing countries such as Turkey.
Turkey can easily turn the 168.9 billion dollars of debt in normal conditions, but because of the outbreak indicating that we are not in a normal period Özatay of foreign exchange inflows in Turkey and other countries, he noted currency fell sharply increased output.
Özatay, who is also a TOBB ETU faculty member, stated that due to this picture, there were some problems in foreign debt payment capacity and this increased foreign borrowing rates and exchange rates in parallel with the increase in risk premium.
Depending on the epidemic by Turkey’s two major foreign currency income in tourism and exports in Turkey swap agreements with foreign countries because it wants to meet the sharp decline in short-term foreign currency needs.
Şengül pointed out that there are large external debt repayments especially in the coming summer, which increases the need for foreign financing.
Özlem Derici Şengül
3) He did not find dollars except Turkey swaps?
According to Özatay, Turkey’s banks and beyond outsourcing companies will find there are three ways in front of foreign currency to meet the needs that may arise. First, It can be borrowed from abroad. However, the rise in foreign borrowing rates stands out as a negative factor in line with the increase in risk premium.
The second way is to request funds from the International Monetary Fund (IMF), but the government has announced that it will not apply.
The third way is to look for agreements to postpone external debt for a certain period of time. “Third way too risky and Turkey should enter alone,” said Özatay, “however, may be brought debt rollover in international cooperation within the G20. If this can be done in this way, it may be prevented from coming up as a problem in the future. Many organizations and economists, including the United Nations, have started to propose this path. ”
However, Turkey does not have applied to any of these ways.
Şengül stated that the Treasury could go to external borrowing through the issuance of eurobond, but the option to postpone debt was low.
4) Does the swap agreement with Qatar meet the need?
According to Özatay, after the Qatar deal if you can breathe Turkey, but other swap agreements that deal in dollars or the euro would be much more useful.
According to Şengül, even if it is in Qatari rial instead of dollar, it is important to have a swap agreement but it is not sufficient to meet the need.
The convertibility of Qatar Rial (currency convertibility of another) indicating that it is unlikely that the low dollar and Turkey to give Rial Sengul, “therefore will be relatively small return swaps in Qatar,” he said.
If some get decline in exchange rates also stressed that there is sufficient Qatar swaps for normalization Sengul, TL convertibility in the last period, he points out that it was effective in the delay of Turkey’s swap agreement have fallen much in the international arena.
Stating that swap agreements are mutual and the other party should support credit mechanisms and cash flow, Şengül said, “Many developing countries demand swaps, the demand is high and this may be one of the reasons for the delay.”
Şengül also said that the conversion of TL, which was given to Qatar by swap, to the dollar by this country may also put pressure on TL.
On the other hand, CBRT data shows that the Qatari Rial is kept in reserve without converting it into dollars for 5 billion dollars received with a swap agreement with Qatar.
