Saudi Arabia agreed on Monday to deposit $5 billion in Turkey’s Central Bank, following the devastating earthquakes that hit the country last month.
“This deposit is a testament to the close cooperation and historical ties that exist between the Kingdom of Saudi Arabia and the Republic of Turkey and its brotherly people,” the Saudi Fund for Development said in a statement.
Deposits by foreign governments in other countries’ central banks typically allow the depositor to earn interest and are treated as loans. The fund did not provide specifics on the arrangement.
Why it matters: Turkey has been experiencing a shortage of foreign currency reserves since 2018. The situation grew worse in 2022 due to the surging commodity and energy prices resulting from the Russian invasion of Ukrain, hitting Turkey especially hard as the country is heavily dependent on imports.
As a result, Turkey is working to secure foreign currency inflows from the Gulf, especially Saudi Arabia and Qatar, Mustafa Sonmez reported for Al-Monitor in late November.
The foreign currency shortage is compounding Turkey’s ongoing economic crisis, which is also marked by high inflation and the depreciation of the lira.
Saudi Arabia has historically held vast foreign currency reserves due to its oil exports.
Know more: This is not the first time Saudi Arabia has deposited billions of dollars in another Middle Eastern country’s central bank. In February, the kingdom reportedly agreed to $1 billion in the Yemeni government’s central bank.