Turkey's central bank said on Wednesday it had agreed with Saudi Arabia to end a $5 billion deposit deal it made with the kingdom last year.
The decision, made in accordance with an agreement with Saudi Arabian authorities, allows the Turkish central bank to reduce its foreign liabilities, according to a statement from the monetary authority.
The repayment marks another milestone for the central bank as it rebuilds its balance sheet after years of foreign exchange intervention led to a decline in reserves.
At one point, the bank's foreign currency liabilities exceeded $60 billion. The bank managed to reverse the trend after it abandoned unorthodox policies last year, following a series of interest rate hikes that saw the base rate hit 50%.
“We have largely eliminated swaps with domestic banks and are currently renegotiating deposit agreements with international counterparties,” central bank governor Fatih Karahan said in an interview with Bloomberg this month.
Read more: Turkey's central bank hopes to return funds used to withdraw reserves
"It's a sign of confidence," said Tim Ash, emerging markets strategist at RBC BlueBay Asset Management. "Türkiye is moving to a much better fundamental position with net reserves now positive"
Bloomberg Economics estimates foreign exchange reserves rose $79 billion in the second quarter, the fastest rise in at least 40 years. However, net reserves, excluding swaps with commercial lenders, were about $10 billion in the first week of July.
