On Monday, Saudi Arabia announced that it deposited $5 billion into the Central Bank of the Republic of Turkey.
The move was made to support Turkey’s economy, which has taken a battering from pervasive inflation and from the earthquakes that have devastated parts of the country.
The decision to deposit the money signals a warming of bilateral relations between Riyadh and Ankara. The expected boost it will likely provide for the Turkish economy may also bolster President Recep Tayyip Erdoğan’s odds of staying in power in upcoming elections.
Saudi Arabia deposits $5 billion into Turkey’s central bank
Saudi Arabia deposited the large sum of money through its Saudi Fund for Development.
A statement issued by the fund on Monday called the deposit “a demonstration of the Kingdom of Saudi Arabia’s commitment to supporting Turkey’s efforts to strengthen its economy,”
The Saudi Minister of Tourism and Chairman of the Saudi Fund for Development Ahmed Aqeel Al-Khateeb signed the agreement with the Governor of the Central Bank of the Republic of Turkey, Şahap Kavcıoğlu.
The Turkish economy is experiencing difficulties for two main reasons. Firstly, there are the costs associated with the deadly earthquakes that leveled cities in the southeast portion of the country; and secondly, there is the long-running issue of rising inflation.
According to a rapid damage assessment report conducted by the World Bank, Turkey sustained $34.2 billion in direct physical damages from the earthquakes. This is equivalent to approximately four percent of the country’s total GDP in 2021.
However, the total cost of the earthquake could far exceed that figure, says the World Bank. Recovery and reconstruction costs will add to the initial sum, possibly doubling it. The disruption caused by the natural disaster to the economy will likewise add to the total costs.
Meanwhile, Turkey’s inflation woes continue. Despite a slight easing of inflation in the first months of 2022, the inflation rate is still hovering above the exceptionally high rate of 55 percent.
At the same time, the Turkish lira currency is nearing a record low against the dollar and consumer prices are continuing to rise.
Although the $5 billion deposit by Saudi Arabia will not be enough to erase the economic woes of Turkey, it is certainly not an insignificant amount, and will be gladly welcomed by Turkish economic officials as a much-needed financial injection.
The deposit hints at the possibility of a growing rapprochement between Turkey and Saudi Arabia, after a prolonged period of souring relations.
Ankara and Riyadh have previously locked horns over several issues, notably the murder of Saudi journalist Jamal Khashoggi in Istanbul and Turkey’s support for Qatar after the Saudi-led blockade of the latter in 2017.
Both states had also clashed on their support for various states and non-state players across the Middle East and North Africa.
However, as noted by the Council on Foreign Relations, Turkey began to make overtures toward rapprochement with Saudi Arabia in 2022, largely to avoid diplomatic isolation in an increasingly geopolitically complicated region.
Saudi Arabia’s decision to deposit a substantial sum appears to signal that Riyadh too is willing to improve bilateral relations.
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