UPDATE 1-Turkey in talks over currency swaps with central banks

(Adds central bank governor quotes)

ANKARA, April 19 (Reuters) - Turkey is holding talks with central banks on new swap agreements, Central Bank Governor Murat Uysal said on Sunday, as it seeks funds to contend with the economic impact of the coronavirus outbreak.

The number of COVID-19 cases in Turkey has risen above 80,000, overtaking Iran for the highest total in the Middle East and triggering restrictions that have forced businesses to furlough or lay off millions of workers.

The government has promised to top up their income or pay a small daily stipend, but it also has $170 billion in foreign debt to repay this year and the central bank’s net hard currency reserves have fallen to an 11-month low of $27 billion.

“We have had ongoing swap agreements with some countries for a long time to support trade in local currencies. With that, we are also holding talks with central banks to achieve new swap agreements and strengthen our existing cooperation,” Uysal told the state-owned Anadolu news agency.

He gave no details, but a week ago officials said Turkey had held talks with the United States about securing a swap line from the Federal Reserve in addition to other funding options. One Turkish official said talks were also held with the Bank of England.

In a swap, the Fed accepts other currencies in exchange for dollars. It has added temporary lines to central banks including those of Brazil, South Korea and Mexico to backstop global financial markets amid the coronavirus pandemic.

Uysal said that foreign trade, tourism and transportation had all been been hurt by the pandemic, with exports to Europe hit particularly hard.

The drop in demand that hammered air travel in mid-March had spread to nearly all sectors by the end of the month, he said, but the bank expects a speedy recovery in the broader economy during the second half of the year.

The bank views a slowing of the decline in consumer spending this month as a sign that the worst of that slump has been reached, Uysal said.

Turkey had taken timely, goal-oriented and predictable steps in response to the coronavirus outbreak and still has “a very wide and flexible set of tools” to address the challenge, he added.

Many economists expect Turkey to suffer its second recession in two years, but Uysal said the country would bounce back quickly.

“The central bank’s growth projections point to a rapid recovery in the second half of the year, once daily life and business return to normal in our country after a weak trend in the second quarter,” he said. (Reporting by Tuvan Gumrukcu Writing by Dominic Evans Editing by Hugh Lawson and David Goodman)