The World Bank is in advanced talks with Turkey to double its financing to Turkey to $35 billion, with the aim of supporting the stability of the largest non-oil economy in the Middle East, according to Bloomberg.
The discussions include the bank's pledge to provide nearly $18 billion for projects over the next three years, in addition to more than $17 billion it is pumping into programs already in place, said sources to Bloomberg. The sources added that the new financing will include direct lending to the government as well as support for the private sector.
The agreement will be a sign of the bank's confidence in Turkey's new economic team, led by Treasury and Finance Minister Mehmet Simsek and Central Bank Governor Hafiza Kaya Erkan.
Since their appointment last June, Turkey has begun to back away from the unconventional “growth at all costs” economic policies that have haunted the country's economy for several years, as President Recep Tayyip Erdogan stuck to them until his re-election last May. Simsek and Erkan are leading efforts to curb runaway inflation and put the nearly trillion-dollar economy on a more sustainable path.
The World Bank expects two-thirds of the $18 billion to go to Turkey's private sector, through direct investment and guarantees, the sources said. They added that some of the financing will be used to provide short-term guarantees to finance trade and support Turkish exporters.
The government pledged to build about 200,000 housing units within a year for survivors, and the cost of reconstruction was estimated at about $100 billion. The World Bank had already provided a loan of 910.5 million euros ($980 million) to Turkey for reconstruction, and this loan was part of its current allocations of $17 billion.
In the wake of the two earthquakes, Turkey's current account deficit widened to about 6% of GDP, with exporters in affected areas suffering from frequent power outages, while encouraging very low borrowing costs for imports.
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