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Turkey: President Erdogan visits Gulf countries, seeks financial help for country's ailing economy

Pankaj Prasad
Turkish President Recep Tayyip Erdogan
Turkish President Recep Tayyip Erdogan

The Turkish currency lira has lost more than 29 percent of its value this year and foreign exchange reserves are almost exhausted.

Turkish President Recep Tayyip Erdogan visited Saudi Arabia, Qatar and the UAE last week after securing another five-year term in recent elections. During this, he tried to save Turkey's faltering economy by seeking investment and financial aid from the oil-rich Gulf countries.

The importance of the Gulf lifeline to Turkey's ailing economy is reflected in the fact that Qatar and the United Arab Emirates (UAE) recently provided Turkey with a US$20 billion currency swap, while Saudi Arabia last March 5 billion US dollars were deposited in the Central Bank of Turkey. In addition, last month the UAE and Turkey signed a trade deal worth about US$40 billion over the next five years.

In fact, Turkey's economy is facing hyperinflation close to 40 percent. The Turkish currency lira has lost more than 29 percent of its value this year and foreign exchange reserves are almost exhausted. Erdogan was then forced to reluctantly accept economic reality and abandon his controversial economic policies, at least temporarily.

President Erdogan made these changes

He brought back former investment banker Mehmet Simsek to the position of Finance Minister. Simsek served in the same position from 2009 to 2015. He also appointed Hafiz Gay Erkan, former CEO of First Republic Bank, as governor of the Central Bank and tried to convince international investors that he would no longer insist on implementing his unorthodox economic policies.

The preparations for Erdogan's visit to the three Gulf states were done by Mehmet Simsek. Earlier, SIMSEC held meetings in Saudi Arabia, United Arab Emirates and Qatar last month and held preliminary discussions to promote economic partnership between these countries and Turkey.

Speaking to reporters before leaving Istanbul, Erdogan said, "We hope to improve our relations and cooperation in many areas." We will focus on joint investment and commercial initiatives that we can pursue with these countries. The Turkish President started his three-day visit on Monday with about 200 businessmen and several ministers. He earlier visited Saudi Arabia and held meetings with King Salman and Crown Prince Mohammed bin Salman.

Nearly 400 business leaders and executives participated in the Saudi-Turkish Business Forum in Jeddah and discussed investment opportunities, particularly in the areas of manufacturing, construction, tourism, mining, food agriculture and defence. The two sides signed nine agreements covering energy, construction, digital technology, media, education, health and real estate. The value of these agreements has not been disclosed. Saudi Defense Minister Prince Khalid bin Salman said that Saudi Arabia has agreed to buy Turkiye Baker drones, but did not disclose the amount involved in the deal.

Last month, Saudi Aramco, a leading producer of energy and chemicals, held a meeting with about 80 Turkish contractors and discussed with them the possibilities of several projects to be executed in Saudi Arabia for an estimated amount of US$ 50 billion. was discussed. Currently, 1,140 Saudi companies are operating in Turkey and 395 Turkish companies are investing in Saudi Arabia.

President Erdogan's next stop on Tuesday was in Qatar, where he was received by Emir Sheikh Tamin bin Hamad Al Thani and held talks at the Lusail Palace. During the meeting, Erdogan gifted the Emir the Togg, Turkey's first manufactured electric car.

UAE President Sheikh Mohamed bin Zayed Al Nahyan met Erdogan on Wednesday at the Rashtrapati Bhavan in Abu Dhabi, the last leg of Erdogan's tour. The two leaders signed agreements and MoUs estimated at US$ 50.7 billion.

President Erdogan's tour of the three prosperous Gulf countries can be considered a success, as he has promised massive foreign direct investment and boosted central banks to find desperately needed foreign currency. Turkey is facing a shortfall in foreign exchange reserves before November, while it has to pay several huge debts.