Türkiye borrows $1 billion from the World Bank in a recent agreement to support earthquake zones
Türkiye and the World Bank concluded an agreement to provide the latter with a loan of 910.5 million Euros ($1 billion) to support the earthquake zone in the south of the country.
The term of the loan is 18 years, including a grace period of 5 years.
The loan will be used within the framework of the Rehabilitation and Reconstruction Project after the earthquake in Türkiye,” according to a statement by the Turkish Ministry of Treasury and Finance.
The loan will be used for projects of the Ministry of Environment and Urban Development, the Ministry of Health, and the state İlbank.
Turkish Treasury and Finance Minister Mehmet Şimşek told Turkish Anadolu News Agency that the World Bank’s support for the reconstruction process in the earthquake area is very important.
He added, “We’ll continue to work with all our energy and mobilize all our international and local resources to help the region return to its former state as soon as possible”.
On February 6, 2023, two earthquakes of magnitude 7.7 and 7.6 struck southern Türkiye and northern Syria, followed by thousands of aftershocks.
In all, more than 57,000 people have died in the two countries and more than two million people have been rendered homeless in Türkiye alone.
While the Turkish Business and Business Federation estimated the earthquake’s losses at $84 billion, including $70.8 billion for the restoration of thousands of damaged homes, as well as damage to roads, manufacturing points and production capacity, which will have an impact on overall growth.
Türkiye is experiencing difficult economic conditions and confusion in monetary and economic policies, as the Monetary Policy Committee, headed by the Governor of the Central Bank, Hafize Gaye Erkan, raised the interest rate to 25% from 17.5%, which is much higher than the poll’s expectations.
Most economists polled by Bloomberg had expected a rise to 20%.
While the rate is still well below the level of price growth in Türkiye, this is the third consecutive rise since President Recep Tayyip Erdogan won re-election in May pledging more orthodox policies for the economy that foreign investors have fled in recent years.
Many investors believe, according to Bloomberg, that the central bank is still too shy, and they cite the fact that inflation-adjusted interest rates are still in negative territory as evidence of this.
Erkan’s approach poses significant risks to the credibility of Türkiye’s central bank, especially after it sharply raised its inflation forecast last month.
The province said price growth wouldn’t peak until the second quarter of next year, but showed little willingness to raise interest rates much faster.
