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Azerbaijan denies negotiating a currency swap deal with Turkey

Baku says instead of a swap deal, it is negotiating 'a settlement mechanism' in national currencies with Turkey
Schoolchildren wave an Azerbaijani flag during the annual event outside the Heydar Aliyev Cultural Center in Baku on 26 April 2018. (AFP)

Azerbaijan said on Friday that it is not negotiating a €1bn ($1.14bn) currency swap deal with Turkey, a week after Ankara said the two countries were close to reaching an agreement. 

“The central banks of Azerbaijan and Turkey are not conducting any negotiations on this issue,” said Elman Rustamov, chairman of the board of the Central Bank of Azerbaijan, in a  press conference. 

“We are negotiating with Turkey to create a settlement mechanism in national currency, and we are trying to eliminate some technical problems."

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Two Turkish officials last week told Middle East Eye that Turkey is close to signing a €1bn currency swap deal with Azerbaijan in the coming weeks. 

However, that same week, unnamed sources speaking to Bloomberg HT also said that instead of a swap deal, Azerbaijan would open a €1bn deposit account in the Turkish Central Bank. 

Reuters also reported last month that Turkey was close to signing a currency swap deal with Baku. 

Turkey is in dire need of financial support amid a record depreciation of the lira against the US dollar, mainly due to Turkish President Recep Tayyip Erdogan's crusade against interest rates.

Excluding swaps and commitments, the Turkish Central Bank’s net international reserves plunged to minus $56bn last month, the lowest on record since 2002, following a string of hard currency sales by the bank to stabilise the lira.