Saudi Arabia has agreed to deposit $5 billion into Turkey’s central bank through its Saudi Fund for Development. This move is part of Saudi Arabia’s commitment to supporting Turkey’s efforts to strengthen its economy, as stated in the fund’s statement on Monday. This decision comes at a time when Turkey is struggling with a battered economy, hit by high inflation and recent earthquakes that killed over 46,000 people, leaving millions homeless.
For years, Turkey’s President Recep Tayyip Erdogan had resisted raising interest rates, despite mounting inflation. The country’s inflation is still above 55%, and its currency is hovering near record lows against the dollar after years of policy intervention. Moreover, Turkey’s economy has been impacted by higher global energy prices, the Covid-19 pandemic, and its widening current account and trade deficit. This situation has made it difficult for Turkey’s 85 million citizens to afford basic goods.
Saudi Arabia’s move indicates an improvement in the relationship between the two countries, which had been strained following the murder of journalist Jamal Khashoggi by Saudi agents in the Saudi consulate in Istanbul. In the years since, both countries had boycotted each other’s products and flights and blocked each other’s media outlets. However, leaders of both Turkey and Saudi Arabia made diplomatic visits to each other’s countries in 2022 and pledged trade and investment, as Erdogan shifted his posture towards financial support for his country’s economy.
Observers note that Saudi Arabia’s move appears to have an apparent agenda ahead of Turkey’s presidential election on May 14. This move also shows Erdogan’s leverage, as Saudi Arabia had previously demanded certain reforms before providing financial support to other ailing economies in the region, such as Pakistan and Egypt. However, the deposit to Turkey comes with no strings attached, making it interesting given Saudi Arabia’s lending history.
The Turkish central bank and Saudi Fund for Development have not yet responded to requests for comment.
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