Turkey is mending broken relations with its neighbors after years of adventure in the Middle East and the Eastern Mediterranean. In turn, Gulf states — including erstwhile rivals such as Saudi Arabia and the United Arab Emirates — have provided relief to Turkey’s cash-strapped central bank through currency swaps and direct deposits. But will these bailouts be enough to reverse Türkiye’s fortunes?
Turkey has become a top destination for wealthy Gulf tourists, injecting much-needed dollars into the country’s economy. But tourism is only a small part of the capital pouring in from the Middle East.
From 2016 to 2019, Qatar’s investment in Turkey increased by nearly 500%, replacing Germany, Russia and other countries to become Qatar’s second largest foreign direct investor.
Détente with Saudi Arabia and the United Arab Emirates kicks in in 2022, allowing Turkey to strike deals worth billions of dollars with its former rival.
“Turkey has a big overall external financing need, which is basically demand for dollars,” said Timothy Ash, emerging markets strategist at BlueBay Asset Management.
“Offshore is logical. Go abroad and try to find someone to give them dollars.”
Since 2019, Turkey’s central bank has spent more than $100 billion to maintain the lira’s exchange rate due to the ongoing currency crisis.
Gulf countries have provided relief in the form of currency swap lines or direct deposits. But critics warn that these short-term measures to boost reserves may not solve the country’s long-term problems.
“Turkey is spending more than it can and more than it should. It borrows money from so-called friendly countries to meet its short-term capital needs,” said Birg Yilmaz, the opposition’s chief economist. Obviously can’t last long.” Great party.
Watch the video above to see why Türkiye needs Gulf money.