Turkey’s economy has received a significant boost after Saudi Arabia agreed to deposit $5 billion into Turkey’s central bank through its Saudi Fund for Development.
The move is a demonstration of Saudi Arabia‘s commitment to supporting Turkey‘s efforts to strengthen its economy, particularly as it struggles with high inflation, a weak currency, widening trade deficits, and the devastating impact of recent earthquakes.
The financial support from Saudi Arabia comes as a welcome relief for Turkey, as it has been grappling with a series of economic challenges in recent years. Turkish President Recep Tayyip Erdogan has been resisting calls to raise interest rates to combat inflation, a stance that has contributed to the country’s economic struggles.
The move by Saudi Arabia signals a significant improvement in relations between the two countries, which had soured following the murder of journalist Jamal Khashoggi in the Saudi consulate in Istanbul.
The two countries have since made diplomatic visits to each other’s countries and pledged trade and investment.
It is noteworthy that Saudi Arabia’s lending to Turkey comes with no strings attached, unlike its lending to other distressed credits like Pakistan, Egypt, Tunisia, and Bahrain, which require good macro policy and/or IMF programs. Observers believe that the move by Riyadh has an apparent agenda ahead of Turkey’s presidential election on May 14.
The financial lifeline from Saudi Arabia is a significant boost for Turkey’s economy and shows the leverage of Erdogan. With no strings attached, it remains to be seen how Turkey will utilize this financial support to strengthen its economy.