The Central Bank of the UAE (CBUAE) and its Turkish counterpart struck a bilateral currency exchange arrangement to assist enhance trade and investment ties.
According to the CBUAE, the arrangement between the UAE dirham and the Turkish lira is worth Dh18 billion ($4.9 billion) and 64 billion Turkish lira.
A foreign currency swap is an agreement between two parties to exchange money in which the principle and interest payments on a loan made in one currency are exchanged for a loan of similar value in another currency.
The deal will boost bilateral economic and financial cooperation between the two countries.
The arrangement will be in effect for three years, with the option of an extension by mutual consent, according to the UAE banking regulator.
“The signing of this agreement with the Central Bank of the Republic of Turkey demonstrates each nation’s determination to strengthen bilateral financial cooperation, notably in the spheres of trade and investment between the two nations,” CBUAE governor Khaled Mohamed Balama said.
The agreement shows “the two central banks’ resolve to boost bilateral commerce in local currencies in order to develop economic and financial connections between our nations,” said Ahap Kavcolu, governor of Turkey’s Central Bank.
It will also contribute to the improvement of Turkey’s foreign currency reserves and the reduction of the country’s massive foreign debt load. The Turkish currency, which has been under pressure in recent quarters as a result of surging inflation and drastic rate cuts last year, is expected to lose almost 45 percent of its value versus the US dollar in 2021.
Following meetings between Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, and Turkish President Recep Tayyip Erdogan in November, the UAE established a $10 billion fund to assist investments in Turkey.
The investment fund will focus on strategic assets like energy, health, and food in order to strengthen support for the Turkish economy.