World Bank pledges additional $18 billion support package to Turkey

The World Bank has reaffirmed its commitment to stand by Turkey in implementing policies aimed at stabilizing its economy. Humberto Lopez, the Country Director for the World Bank, recently expressed this commitment, emphasizing the bank's readiness to provide substantial financial support.

Lopez, in an interview with Turkey’s state-run Anadolu News Agency, outlined the significant financial assistance that the World Bank plans to extend to Turkey. He stated, "In addition to our ongoing $17 billion program, over the next three years, we anticipate preparing and presenting new operations to the World Bank Group’s Board for $18 billion." This substantial sum encompasses both direct lending to the Turkish government and support for the private sector.

The total financing package, when considering all relevant financial instruments, is projected to reach around $35 billion. According to Lopez, this significant commitment "responds to the strong commitment shown, and more importantly the actions taken, by the administration to restore macroeconomic stability."

Lopez commended Turkey's impressive economic performance over the past two decades but also acknowledged the challenges it currently faces. Persistent inflation, an overvalued exchange rate, and fiscal pressures arising from the government's response to the devastating earthquakes in February have put the country's economic track record at risk.

"In this regard," Lopez stated, "we believe that the monetary policy tightening being implemented by the Central Bank, the unwinding of distortive financial regulations, and the fiscal revenue measures to curtail the fiscal deficit being pursued by the Ministry of Finance are steps in the right direction."

These remarks come in the wake of the Turkish government unveiling its medium-term economic program, which sets ambitious goals for the country's economic development. The program aims for an average GDP growth rate of 4.5% from 2024 to 2026, with the aspiration of joining the ranks of high-income countries with an economic size exceeding $1.3 trillion. To achieve these goals, the government plans to employ a combination of monetary, fiscal, and income policies to address the structural factors contributing to high inflation.