The World Bank has doubled its loans to Turkey to $35 billion to help stabilize the Middle East’s largest non-oil economy, Finance Minister Mehmet Simsek announced on Wednesday, state-run Anadolu news agency reported.
Şimşek announced significant financial cooperation between Turkey and the World Bank for the period 2024-2028. The cooperation will be launched within the scope of the Country Partnership Framework (CPF) program and will see Turkey receive an additional $18 billion in funding over the first three years, bringing the World Bank’s commitment to Turkey to $35 billion. This measure will make Turkey the third-largest recipient of World Bank concessional loans in the world.
The agreement marks the biggest vote of confidence in Turkey’s economic policies since the general election, Bloomberg previously reported.
Since June, Turkey has begun to back away from the unconventional growth-at-all-cost economic policies that President Recep Tayyip Erdogan pushed through until his reelection in May. Mr. Şimşek and the central bank have led efforts to rein in runaway inflation and put the nearly $1 trillion economy on a more sustainable track.
The agreement covers a wide range of areas, including improving disaster resilience, energy, green transformation, fighting climate change, increasing productivity, infrastructure, logistics, industry, agriculture, education, health and inclusiveness.
The program, implemented jointly by World Bank Group entities the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), aims to increase the impact of World Bank activities in Turkey. About two-thirds of the $18 billion financing package planned over the next three years will support private sector development, of which $6 billion will come from IBRD, $9 billion from IFC and $3 billion from MIGA in short-term guarantees.
The program underscores the World Bank’s support for Turkish policymakers’ efforts to restore macroeconomic stability.
Simsek and former central bank governor Hafize Gaye Ercan met with the bank’s Washington-based president, Ajay Banga, in India in July, Turkish state media reported at the time.
Part of the newly pledged funds is likely to go towards helping rebuild areas devastated by two major earthquakes that struck southeastern Turkey on February 6, 2023, killing more than 50,000 people.
The government has pledged to build about 200,000 homes for victims within a year and estimates the cost of reconstruction at about $100 billion. The World Bank has already provided Turkey with a 910.5 million euro ($980 million) loan for reconstruction, part of its previous allocation of $17 billion.
After the quake, exporters in the affected areas suffered power outages, ultra-low borrowing costs led to a rise in imports, and Turkey’s current account deficit widened to about 6 percent of gross domestic product.
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