Turkey sees cash flow from $51bn UAE deal starting by end of this year

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Turkey anticipates investments in its economy by the United Arab Emirates will begin by the end of this year as part of last month’s landmark agreement, the first time it’s indicated the timing of when it expects the Gulf oil producer to make good on pledges for financial support.

“We have very productive dialogue with Gulf countries, with the most concrete example being the $51bn financial investment package announced by the UAE,” Turkey’s Treasury and Finance Minister Mehmet Simsek said in an interview with Yeni Safak newspaper published on Thursday.

Many of those deals are provisional and not all may materialise. Still, the agreement marked the high point of Turkish President Recep Tayyip Erdogan’s recent visit to the Middle East, where he sought foreign cash to finance Turkey’s widening current-account gap.

UAE investment in Turkey

A wealth fund of Abu Dhabi, the capital and the wealthiest of seven emirates that make up the UAE, will buy as much as $8.5bn of bonds to be issued by Turkey to fund reconstruction efforts following massive earthquakes that took place in February.

The two countries also agreed on energy projects worth around $30bn, though Simsek said investments in those areas could “take time.”

Simsek, a veteran politician who served in Erdogan cabinets from 2007 to 2018, was brought back by the Turkish president following an election victory in May to steer the economy away from policies pursued over the last few years.

Turkey’s policy pivots

Simsek’s top priorities are to stem the widening of Turkey’s current-account deficit and to slow inflation, which is running at nearly 10 times the official target of 5 per cent.

Though last month’s tax hikes will further boost consumer inflation, they were a necessary “one-time” fix needed for the Middle East’s largest non-oil economy, Simsek said.

The comments mark one of the first interviews Simsek had with a major national news outlet since taking over in June. Yeni Safak, owned by Albayrak Group, is a pro-government newspaper that has long supported Erdogan’s growth-at-all-costs policies that relied on low-interest rates.

Last month, Yeni Safak called on Turkish policymakers to stop rate increases after the central bank hiked its key rate to 17.5 per cent. Similarly, in 2021, Yeni Safak published a front-page article criticising then-Governor Naci Agbal for a rate hike.

Agbal was soon removed by Erdogan and Sahap Kavcioglu, a former columnist for the newspaper, was named the monetary authority’s chief.