The World Bank has doubled its exposure to Turkey to $35 billion to help stabilize the Middle East’s largest non-oil economy, Treasury and Finance Minister Mehmet Şimşek announced on Wednesday, the state-run Anadolu news agency reported.
Şimşek announced a significant financial cooperation between Turkey and the World Bank spanning the fiscal years 2024-2028. The collaboration will launch within the Country Partnership Framework (CPF) program, which promises Turkey an additional $18 billion in funding over the first three years, bringing the World Bank’s commitment to Turkey to $35 billion. With this step, Turkey will become the third largest recipient of concessional World Bank loans in the world.
This deal marks a vote of confidence in Turkey’s economic policies since the general election, according to an earlier report by Bloomberg.
Since June, Turkey has begun to undo years of unconventional, growth-at-all-costs economic policies pushed by President Recep Tayyip Erdoğan until his re-election in May. Şimşek and the central bank are leading efforts to rein in runaway inflation and put the nearly $1 trillion economy on a more sustainable path.
The deal covers wide range of fields, including improvement of disaster resilience, energy, green transformation, combating climate change, increasing productivity, infrastructure, logistics, industry, agriculture, education, health and inclusivity.
The program will be 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), with the aim of increasing the impact of the bank’s activities in Turkey. About two-thirds of the $18 billion financing package planned for the next three years will support private sector development, with $6 billion from IBRD, $9 billion from IFC and $3 billion from MIGA’s short-term guarantees.
The program highlights the World Bank’s support for Turkish policymakers’ efforts to restore macroeconomic stability.
Şimşek and former central bank governor Hafize Gaye Erkan met with Ajay Banga, the president of the Washington-based lender, in India in July, Turkish state media reported at the time.
Some of the newly committed funds will likely be allocated to help in the reconstruction of areas devastated by two massive earthquakes that struck Turkey’s southeast on Feb. 6, 2023, killing more than 50,000 people.
The government has pledged to build some 200,000 residential units within a year for survivors and estimated the cost of reconstruction at about $100 billion. The World Bank has already extended a €910.5 million ($980 million) loan to Turkey for rebuilding, part of its previous $17 billion allocation.
Following the earthquakes, Turkey’s current account deficit widened to about 6 percent of gross domestic product, as exporters in the affected areas suffered outages and ultra-low borrowing costs encouraged imports.