Diplomacy & Dollars

The recent embrace between Turkiye (renamed at the UN) and Saudi Arabia culminated in a deposit of $ 5 billion by the Saudi Development Fund with the Central Bank of Turkiye whose net foreign exchange reserves had slumped to less then $ 20 billion this year .No conditions appear to have been imposed along with the deposit .The Kingdom of Saudi Arabia has been ignoring fervent requests by Pakistan, Egypt, Tunisia and Bahrain for cash injections to support their beleaguered economies but to no avail.These countries were advised to enter the IMF program and go for macro economic and structural reforms instead.

Credit MSN

Saudi Leverage over Recep Tayyip Erdogan

After the assassination of Saudi dissident Jamal Khashoggi in the Saudi embassy in Turkiye relations between the two countries  deteriorated and an unofficial boycott of goods and trade took place. A collapsing Lira, climbing interest rates, soaring inflation and Turkiye Presidential elections looming in May this year may have persuaded Erdogan to initiate rapprochement with a regional rival. The Turkish premier went to Jeddah on a state visit and the Saudi monarch reciprocated by coming to Ankara. Trade and investment overtures ensued and relations became cordial. Conveniently Turkish courts stopped trial in absentia of 26 Saudi citizens accused of complicity in the assassination of Jamal Khashoggi.

Credit The Arab Weekly

Shoring up the Lira

Despite having expended almost $ 18 billion to shore up the Turkish Lira and Russia’s state nuclear agency wiring more than $ 5 billion to to Turkey for the building of an atomic power plant and slashing of interest rates by Turkey’s Central Bank the economic woes  kept mounting.Turkiye’s foreign exchange crisis had been worsening since last year. Mohammad Bin Salman the Crown Prince of Saudi Arabia is said to have realised his economic leverage over Turkiye and besides putting regional bickering to an end managed to get the assassination of  Jamal Khashoggi consigned to the archives. A policy U turn ensued resulting in an injection of dollars by the Saudi Development Fund without any conditionalities. Markets in Turkiye which were turning jittery got pacified and the electoral prospects of Erdogan in the upcoming Presidential elections have considerably brightened. It remains a measly price for Turkiye to pay for a deposit of a mere $ 5 billion dollars unless there is more then disclosed in the arrangement .

Turkiye lately resumed full diplomatic ties with Israel in bid to secure economic benefits.

Credit AlJazeera

Reassurances

Another economically beleaguered country Sri Lanka has received the requisite letter of assurance from China’s EXIM Bank for crucial debt restructuring and its almost certain that the International Monetary Fund (IMF) will now approve its $ 2.9 billion bailout arrangement. A letter of intent has been formally despatched to the Fund authorities.Sri Lanka had been successful in obtaining formal assurances from its creditors including India and China. The EXIM Bank’s formal assurance was desperately needed by Sri Lanka as China owns almost 10 % of Sri Lanka’s external debt.The Sri Lankan policy makers are resolute and determined this time around to carry out much needed economic restructuring . Despite 16 IMF agreements Sri Lanka had lived beyond its means.

By Nadir Mumtaz