Turkish, UAE central banks ink swap, cooperation deals to deepen financial, economic cooperation

The central banks of Türkiye and the United Arab Emirates signed three agreements including a swap deal on Thursday to deepen financial cooperation and enhance trade and economic ties between the two countries.

The deals include a bilateral currency swap agreement between the Turkish lira and the UAE’s currency, the dirham, in addition to two memoranda of understanding: one to promote the use of local currencies for cross-border transactions, and another to interlink their payment and messaging systems.

"These agreements aim at promoting financial and economic collaboration and strengthen bilateral trade," the Turkish Central Bank said in a statement.

The swap agreement is for 198 billion Turkish liras ($4.76 billion) and 18 billion UAE dirhams ($4.9 billion), mutually.

It is designed to promote bilateral trade with the aim of further strengthening financial cooperation between the two countries through providing local currency liquidity to financial markets, enabling more effective and efficient settlement of cross-border financial and commercial transactions, according to the Turkish Central Bank.

- Encouraging use of domestic payment cards and easing cross-border payment transactions

The first pact seeks to provide a framework for encouraging the usage of the UAE’s dirham and Turkish lira in cross-border transaction settlement.

Its goals include expanding the foreign currency market, facilitating international commerce and remittances, boosting investment, and accelerating financial stability and economic progress in both countries. In particular, the agreement calls for strengthening information and experience sharing to accomplish common objectives and creating a local currency settlement scope to increase the usage of both currencies in all current and capital accounts transactions.

The second agreement seeks to boost the use of domestic payment cards and ease cross-border payment transactions while adhering to the regulatory and supervisory requirements of both countries.

It also promotes the sharing of knowledge in creating platforms for central bank digital currency (CBDC) for both people and organizations. It also describes how the UAE's instant payment platform (Aani) and Türkiye's FAST system would be integrated to improve the effectiveness of cross-border financial transactions. This involves connecting switches and electronic systems in both nations to increase interoperability and operational efficiency.

“These agreements reflect the shared commitment of both parties to advancing financial cooperation and fostering bilateral trade using local currencies, in support of broader economic relations and sustainable development goals," said Fatih Karahan, the Turkish Central Bank governor. “The agreements open up new opportunities to facilitate trade and investment relations between stakeholders in both countries.”

Khaled Mohamed Balama, governor of the UAE Central Bank, said: “The agreements signed reflect the commitment of the Central Bank of the UAE and the Central Bank of the Republic of Türkiye to work together in supporting the efforts of both nations to further strengthen their strategic partnership to new heights – particularly in the areas of finance, financial technology, and cross-border digital payments."