Saudi deposits $5bn in quake-hit Turkey’s central bank

Saudi Arabia agreed to deposit $5 billion into Turkey’s central bank through its Saudi Fund for Development, which will  support Turkey’s efforts to strengthen its economy, the fund said in a statement

The news comes as Turkey struggles with an economy battered by years of high inflation and last month's devastating earthquakes that killed more than 46,000 people and left millions homeless.

Turkey’s inflation is still above 55 per cent and its currency is hovering near record lows against the dollar after several years of policy intervention by Turkish President Recep Tayyip Erdogan, who resisted raising interest rates despite mounting inflation.

Higher global energy prices, the Covid-19 pandemic and Turkey’s widening current account and trade deficit have also conflated to put the Turkish economy in a precarious position, and now many of its 85 million citizens living in the country can barely afford basic goods.

Notably, Saudi Arabia’s move signals further improvement in the relationship between the two Muslim countries after ties were all but severed following the murder by Saudi agents of journalist Jamal Khashoggi in the Saudi consulate in Istanbul.

In the years since, the countries had used various means to unofficially boycott each other’s products and flights or block each other’s media outlets. But over the course of 2022, leaders of both Turkey and Saudi Arabia made diplomatic visits to one another’s countries and pledged trade and investment, as Erdogan adopted a complete shift in posture, pursuing rapprochement and financial support for his country’s ailing economy.

For some observers, the move by Riyadh has an apparent agenda ahead of Turkey’s presidential election on May 14.

The Turkish central bank and Saudi Fund for Development did not immediately respond to requests for comment from CNBC.