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Saudi Arabia deposits $5 bln in Central Bank of Turkey

Saudi Arabia signed an agreement to deposit $5 billion in the Central Bank of Turkey through the Saudi Development Fund, according to a statement issued on Monday.

 

The Chairman of the Board of Directors of the Saudi Fund for Development, Ahmed bin Aqil Al-Khatib, signed today, the agreement with the Governor of the Central Bank of Turkey, Shihab Kavji Oglu.

 

The statement did not indicate any details related to the term of the deposit or the expected date of the deposit, it stated that the agreement will contribute to strengthening the Turkish economy by addressing economic aspects in various sectors.

 

Data indicates a large exodus of foreign currency from Turkey abroad. Last year, the central bank spent as much as $108 billion to keep the lira relatively stable, Bloomberg Economics estimates. Despite this, the lira remained the second worst-performing emerging market currency.

 

For the Central Bank of Turkey, maintaining the stability of the lira is the cornerstone of curbing the inflation rate, which exceeded 85% at the end of 2022.

 

Commercial banks’ transfers abroad are increasing, prompting the Turkish Central Bank to warn these banks against transferring any dollars to their counterparts from correspondent banks abroad.

 

This warning comes after net transfers of commercial banks amounted to $ 2.3 billion to deposit accounts abroad in the first six weeks of the year, Bloomberg earlier quoted a person.

 

Meanwhile, Turkey’s central bank is considering a measure to prevent banks from selling lira derivatives to their clients, in the latest move to curb companies’ growing demand for dollars.

 

The Central Bank is preparing a new regulation that requires banks to hold guarantees for futures contracts, in an effort to eventually calm the demand for hard currency in the spot market, according to what was reported by “Bloomberg” last January.

 

The country’s need for foreign currencies may increase after the devastating earthquake that hit the country last month, whose financial losses were estimated by the World Bank at $ 34.3 billion, or about 4% of the country’s GDP for the year 2021, and the bank also reduced its expectations for the country’s economic growth this year by half percentage point.

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