The United Arab Emirates pledged to ramp up financial help for Turkey with deals that could be worth more than $50 billion and include buying $8.5 billion of bonds, as Ankara seeks to stabilize its embattled economy.
(Bloomberg) — The United Arab Emirates pledged to ramp up financial help for Turkey with deals that could be worth more than $50 billion and include buying $8.5 billion of bonds, as Ankara seeks to stabilize its embattled economy.
The agreements were reached during President Recep Tayyip Erdogan’s visit to Abu Dhabi on Wednesday, according to Turkish officials and UAE’s state-run WAM news agency. Erdogan and UAE counterpart Sheikh Mohammed bin Zayed witnessed the signing of several memoranda of understanding.
The breakthrough is the culmination of a rapprochement following years of hostility between Turkey and Gulf states such as Saudi Arabia and the UAE. Erdogan has sought to mend ties with the petrostates in an effort to attract the billions of dollars he needs to put Turkey’s finances on a more secure footing and fund a record current-account deficit.
The MOUs are worth a total of $50.7 billion, according to WAM, and cover investments in everything from nuclear energy to clean hydrogen, petrochemicals, space exploration and defense. Neither Turkish nor UAE officials said how long it would take to finalize the deals.
Abu Dhabi wealth fund ADQ, chaired by UAE National Security Advisor Sheikh Tahnoon bin Zayed, said separately it may finance up to $8.5 billion of “earthquake relief” bonds to accelerate reconstruction efforts following February’s disaster in Turkey.
ADQ, which has around $160 billion of assets, also said it signed an agreement with Turkey’s Export Credit Bank for $3 billion to finance Turkish companies planning to export goods to the UAE and other markets.
The Turkish lira gained after the announcements and traded 0.5% stronger against the dollar as of 9:40 p.m. in Istanbul.
Erdogan visited Saudi Arabia and Qatar this week before heading to the UAE. The Gulf tour follows his reelection victory in May that extended his rule into a third decade. Since then, he’s promised economic reforms to end a cost-of-living crisis.
The UAE announcements were the most significant to come from the trip. With Saudi Arabia, Turkey clinched a deal to sell military drones.
Turkey was trying to attract $25 billion in investments from Gulf countries, Turkish officials familiar with the matter said previously. The UAE, Saudi Arabia and Qatar — enjoying a windfall from a surge in oil and gas prices in the past three years — have already provided foreign exchange to the Turkish central bank through swap agreements and direct deposits.
The Turkish government estimates the economic toll of the February earthquakes at over $100 billion. Foreign investors, meanwhile, have fled the country in droves in recent years largely because of strategies that included keeping monetary policy ultra loose and focusing on growth at the expense of fueling inflation.
Finance Minister Mehmet Simsek, a former Merrill Lynch bond strategist who Erdogan appointed last month, has pledged to reverse some of those policies.
“We have already taken strong initial steps to improve public finances and to reduce persistent high inflation through a multi-pronged strategy,” Simsek said in a speech in Abu Dhabi. “It’s encouraging to hear that our UAE counterparts believe in our program.”
–With assistance from Omar Tamo.
(Updates throughout.)
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