Turkey hopes for funding surge from global institutions

World Bank and EEBRD contribute

Green and digital transformation

Turkey is hoping to attract more than $40 billion in project funding from global financial institutions over the next three years to increase environmental investment, boost infrastructure and reduce risk from natural disasters.

Treasury and finance minister Mehmet Şimşek said on April 26 he anticipated Turkey would receive $41 billion in low-cost, long-term finance from international lenders including the World Bank, the International Finance Corporation, the European Bank for Reconstruction and Development (EBRD) and the Islamic Development Bank over the next three years.

The minister issued his statement on his social media account following a series of discussions in the US while attending the IMF and World Bank spring meetings.

“The financing to be secured from those institutions will be used for green and digital transformation, disaster resilience, infrastructure investments and inclusive growth projects,” Şimşek said.

“Thus, we will support sustainable high growth by increasing productivity.”

International investors tend to look to Şimşek and Turkish central bank governor Fatih Karahan as guarantors of economic orthodoxy after a prolonged period of artificially low interest rates. Markets have been further roiled by the arrest last month of the mayor of Istanbul which sparked a market panic and widespread street protests.

Turkey is already receiving funds to support many of the sectors mentioned by Şimşek, though not at the volume he forecast would be flowing in the coming years. 

In mid-April, the EBRD announced it would be providing €25 million ($28 million) in loan funding to private lender Denizbank to support small and medium size enterprises to expand their digital reach. 

The EU is also stepping up, with up to €3 billion in funds through its Horizon Europe research programme for electric vehicle infrastructure expansion, including charging stations for heavy vehicles, boosting zero emission vehicle production and supporting recycling and battery production facilities across Turkey. 

One of the issues identified by Şimşek as a subject for funding, that of disaster resilience, has returned to the headlines in Turkey since the country’s economic centre İstanbul was rattled by a moderate earthquake of magnitude 6.2 on April 23. 

Though little damage was done and the only casualties were people injured jumping from windows, the quake served as a reminder that much of the city, and many other urban areas, are in need of urgent remedial work. 

According to Professor Ali Hepşen, an expert on housing finance at Istanbul University, Turkey needs to change its approach to transformation, integrating green and tech elements with resilience projects, to best make use of funding provided by agencies such as the World Bank and the EBRD, as well as developing more sustainable forms of financing, such as long-term bonds. 

“Today, we know that it is not enough to just make a building earthquake resistant,” he told AGBI. 

“That building also needs to consume less energy, recycle rainwater, limit carbon emissions and provide a healthier indoor environment for its users. Otherwise, we may have to re-transform these structures in 20 years.”

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