Financial Breakthrough: Turkey and UAE Usher in Era of Local Currency Transactions with $4.9B Swap

The Central Banks of Turkey and the United Arab Emirates (UAE) have formally announced a three-part package of accords, explicitly designed to forge stronger, deeper economic and commercial ties. This cooperation signals a major step toward regional financial self-reliance.

Three agreements between Turkey and the UAE

The centrepiece of this comprehensive deal is a substantial bilateral currency swap between the Turkish Lira and the UAE Dirham. This pivotal agreement involves the exchange of 198 billion Turkish Lira for 18 billion UAE Dirhams, totaling approximately $4.9 billion USD. Its core function is to provide local currency liquidity and reduce the exposure of bilateral trade to fluctuations in third-party currencies.

The remaining two accords are Memorandums of Understanding (MoUs) signed by the central banks, which focus on two key areas: 1) accelerating the use of their national currencies for cross-border settlements, and 2) the technological integration of their core payment and messaging infrastructures.

In a press release detailing the new agreements, the Central Bank of Turkey (CBRT) clearly stated that the moves are intended to propel financial collaboration and decisively bolster the volume of bilateral trade.

Memorandums of understanding

The first MoU establishes the necessary framework for the Lira and the Dirham to be widely adopted for settling cross-border commercial and financial transactions. The primary goal is to strategically expand the foreign exchange marketfor these currencies, fostering greater economic stability and shared national growth.

The second MoU is aimed at enhancing the utility of domestic payment cards and removing friction from cross-border transfers between Turkey and the UAE. By linking the UAE's Instant Payment Platform (Aani) with Turkey's highly efficient FAST system, and through the sharing of operational expertise, the efficiency of international financial transactions will be dramatically upgraded.

Fatih Karahan, the Governor of the Turkish Central Bank, affirmed: "These agreements reflect the shared commitment of both parties to advancing financial cooperation. The agreements open up new opportunities to facilitate trade and investment relations."

Meaning for the Turkish Real Estate Sector

This comprehensive package of agreements acts as a direct growth accelerator for the Turkish real estate market, particularly for investors from the UAE and the Gulf region:

- Investment Optimization: The shift to using Dirhams for property purchases in Turkey reduces the investor's exposure to the USD, potentially lowering conversion risks and decreasing transaction costs.

- Confidence and Liquidity Boost: The financial stability provided by the large swap, combined with seamless (fast and cheap) payments via the FAST and Aani integration, dramatically improves the investment environment and is expected to attract greater capital inflow into Turkish property.

- Technological Ease of Management: Streamlining cross-border payments makes property management (receiving rent, paying maintenance fees, transferring down payments) instantaneous and highly efficient, removing major bureaucratic and time barriers traditionally associated with international transfers.