Türkiye's Central Bank announced plans to repay a $5 billion deposit agreement with Saudi Arabia, marking a significant improvement in the bank's foreign reserves.

The agreement to terminate the deposit comes after a record-breaking surge in reserves during the second quarter of 2024. Turkey's Central Bank saw its reserves increase by an estimated $79 billion, the fastest growth in four decades, according to Bloomberg Economics.

This rise in reserves allows Turkey to repay the Saudi deposit, which was initially aimed at bolstering the Central Bank's financial health. The bank had previously struggled with foreign exchange interventions that depleted its reserves.

"We have largely eliminated swaps with domestic banks and are now reviewing deposit agreements with international counterparts," said Central Bank Governor Fatih Karahan.

Financial experts view this development positively. "Turkey is moving to a much better underlying position with net reserves now positive," said Tim Ash, an emerging markets strategist.

The Central Bank's efforts to control foreign exchange and raise interest rates appear to be paying off, with reserves reaching positive territory for the first time in years. However, some analysts caution that excluding commercial lender exchanges, the net reserve increase is lower. (ILKHA)