Saudi Finance Minister Mohammed Al-Jadaan speaks at a meeting of finance ministers and central bank governors of the G20 countries in the Saudi capital Riyadh on February 23, 2020.
FAYEZ NURELDINE | AFP via Getty Images
Saudi Arabia agreed to invest $5 billion in Turkey’s central bank through the Saudi Fund for Development, the fund said in a statement on Monday.
The decision “is proof of the commitment of the Kingdom of Saudi Arabia to support Turkey’s efforts to strengthen its economy,” the statement said.
The news comes as Turkey struggles with an economy battered by years of high inflation and a recent series of devastating earthquakes that have killed more than 46,000 people and left millions homeless. home
Turkey’s inflation remains above 55%, and its currency is hovering near its all-time high against the dollar after several years of policy intervention by Turkish President Recep Tayyip Erdogan, who opposed raising interest rates despite rising inflation.
Higher global energy prices, the Covid-19 pandemic and Turkey’s expanding current account and trade deficit have also combined to put the Turkish economy in a precarious position, and now many of the 85 million citizens who live in the country to pay basic goods.
In particular, Saudi Arabia’s move marks a further development in the relationship between the two countries – the two power players in the Muslim world – after ties were almost severed following the assassination by Saudi agents of the news of Jamal Khashoggi in the Saudi consulate in Istanbul.
In the years since, the countries have used various methods to unofficially boycott each other’s products and flights or block each other’s media. But over 2022, the leaders of both Turkey and Saudi Arabia visited each other’s countries and promised trade and investment, as Erdogan accepted a complete shift in position, pursuing rapprochement and financial support for the country’s ailing economy his
To some observers, Riyadh’s move has an obvious agenda ahead of Turkey’s May 14 presidential election.
“Make sure we now know who MBS wants to win the Turkish election,” Timothy Ash, emerging market strategist at BlueBay Asset Management, wrote in an emailed note.
“It is special that the Saudi loan to Turkey comes with no strings attached – interesting because it lends to other distressed credits, such as Pakistan, Egypt, Tunisia, Bahrain comes with the requirement now for good macro policy and/or IMF programs,” Ash wrote.
Saudi Arabia has also provided financial lines to other ailing economies in the region, but recently rejected requests from Pakistan and Egypt, insisting that they carry out certain reforms first. This does not seem to be the case with Turkey.
“Shows I guess Erdogan’s ‘leverage’,” Ash wrote.
Turkey’s central bank and the Saudi Development Fund did not immediately respond to CNBC’s requests for comment.
