World Bank agrees new $18bn loan to support Turkiye’s economic reforms

Food shop sellers attend clients in a street market at Eminonu commercial district in Istanbul, Turkey, Wednesday, Sept. 6, 2023. (AP)
Food shop sellers attend clients in a street market at Eminonu commercial district in Istanbul, Turkey, Wednesday, Sept. 6, 2023. (AP)
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Updated 08 September 2023
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World Bank agrees new $18bn loan to support Turkiye’s economic reforms

Food shop sellers attend clients in a street market at Eminonu commercial district in Istanbul, Turkey, Wednesday, Sept. 6, 2023
  • Deal suggests support for new finance minister, central bank chief, analysts say
  • Lender agreed $17bn funding deal prior to May election

ANKARA: The World Bank has unveiled a new $18 billion loan package for Turkiye in what appears to be a show of support for the government’s efforts to reshape its economic policy.

The deal, which comes on top of a $17 billion loan signed off by the lender earlier in the year, was announced just a day after President Recep Tayyip Erdogan and Vice President Cevdet Yilmaz presented their medium-term plan, which included targets for inflation, employment and economic growth for the 2024-26 period.

Two-thirds of the new loan are expected to be directed toward the private sector in the form of direct investments and guarantees. The remainder will help to finance public sector activities, including the extensive reconstruction work necessary after the devastating earthquakes that struck the southwest of the country in February.

Turkiye has a strong potential to rise once it adopts correct policies to address its macroeconomic imbalances.

Selva Demiralp, Professor of economics

In an interview with the state-run Anadolu news agency, Humberto Lopez, the World Bank’s country director for Turkiye, praised the government’s efforts to restore macroeconomic stability.

“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,” he said.

“In addition to our ongoing $17 billion program, new operations worth $18 billion will be prepared and presented to the World Bank Group’s board of directors in the next three years.

“Taking into account all financing instruments, this amounts to an interim total financial package of approximately $35 billion.”

Amid an ongoing economic crisis, the appointments of former Merrill Lynch economist Mehmet Simsek as finance minister and ex-Goldman Sachs banker Hafize Gaye Erkan as central bank governor after the May election were seen as evidence of Turkiye’s determination to return to a more orthodox monetary policy. The $17 billion loan package was approved before that poll took place.

Timothy Ash, a London-based strategist at Bluebay Asset Management, said the timing of the new deal suggested an improvement in Turkiye’s relations with its Western allies, which would have been influential in the bank’s decision.

“We should now watch for other multilateral development banks and international financial institutions to follow suit and increase exposure,” he told Arab News.

The deal was “a vote of confidence” for Simsek and Erkan and their more orthodox policies, he said.

In its recently unveiled economic road map, Turkiye aims to become a high-income country, with a GDP of over $1.3 trillion and per capita national income of $14,855, by 2026.

The new medium-term economic plan includes reforms to public finances, trade, the investment environment, employment, human capital and disaster management. Simsek said Erdogan was fully behind the program.

However, experts like Wolfango Piccoli, co-president of London-based Teneo Intelligence, said that while the World Bank loan agreement was meaningful, it was “nothing close to a possible standby agreement” with the International Monetary Fund.

“Leaving aside the size of the package from the World Bank, a deal with the IMF would greatly boost investors’ confidence in Turkiye,” he told Arab News.

An IMF deal would also add transparency to the country’s public finances, including the guarantees provided by the Treasury for public-private partnership projects, and require agenda reforms that were politically unpalatable to the government, Piccoli said.

“The $18 billion in loans from the World Bank cannot achieve anything like that. I think most of the funds will be used for the reconstruction of the areas devastated by the earthquake,” he said.

“It is good news for Turkish firms who may be able to secure loans and guarantees from the World Bank but for foreign investors the package is unlikely to move the needle.”

Selva Demiralp, a professor of economics at Koc University in Istanbul, said the World Bank deal did appear to be a show of support for Turkiye’s post-election economic plans.

Turkiye "has a strong potential to rise once it adopts correct policies to address its macroeconomic imbalances,” he told Arab News.

“The evident abandonment of the policies that were implemented before the election is a strong step in the right direction. (However,) I have questions regarding the sustainability of the program that is laid out by the OVP (medium-term economic program).

“The World Bank seems more convinced. Then again, we are not present at investor meetings … so I cannot tell what will be different this time around by just looking at the OVP,” he said.

“Talking to the politicians directly might provide a clearer picture than what is hidden in the mid-term targets laid out in the program. It is true that the internal consistency of the OVP is much improved. Nevertheless, the document is notorious for missing its targets.

“The growth targets seem ambitious if the disinflation path will hold, for example,” Demiralp said.

“It might be possible with significant capital inflows, and the World Bank loan could be an important step in this direction. But that alone won’t be sufficient given that the toll of the earthquake itself is close to $100 billion.”

Meanwhile, leaders from the world’s top economies, including Turkiye and Saudi Arabia, convened in India on Friday for a two-day G20 summit.

The Turkish government has forecast inflation to hit 65 percent by the end of the year, before dropping to 33 percent in 2024. It also cut its economic growth forecast to 4.4 percent for this year and 4 percent in 2024. The nation’s current account deficit is expected to be $42.5 billion this year and $34.7 billion in 2024.

In June, the central bank increased interest rates to 25 percent, from 8.5 percent, in a bid to temper inflation, which rose to 58.9 percent last month.

The Turkish lira remained weak on Friday, at about 26.8 to the US dollar, down from 18 to the dollar at the same time last year.

 

 


EU agrees sanctions framework for key actors in Sudan war — sources

Updated 3 sec ago
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EU agrees sanctions framework for key actors in Sudan war — sources

EU agrees sanctions framework for key actors in Sudan war — sources
BRUSSELS: European Union ambassadors agreed a framework of sanctions that will be used to target key actors in Sudan’s war and impose asset freezes and travel bans, sources familiar with the matter said.
War broke out in Sudan in April this year between the army, led by General Abdel Fattah Al-Burhan, who ousted longtime autocrat Omar Al-Bashir in 2019, and a paramilitary force led by General Mohamed Hamdan Dagalo, known as Hemedti.
The fighting and bloodshed has continued to escalate despite international attempts to forge a lasting ceasfire. The war has uprooted more than 5 million people from their homes and created a humanitarian crisis with local medics warning of spreading cholera and dengue fever.
The sanctions proposal was sent in July but not approved until Monday. EU foreign ministers still need to give a final sign off later this month before the bloc can start adding individuals and entities to the list.
The United States, Britain, Norway and Germany plan to submit a motion to the UN Human Rights Council to set up an investigation into alleged atrocities in Sudan, including ethnically motivated killings, a draft motion showed on Friday.

Turkiye detains dozens of people in raids following suicide bomb attack

Turkiye detains dozens of people in raids following suicide bomb attack
Updated 03 October 2023
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Turkiye detains dozens of people in raids following suicide bomb attack

Turkiye detains dozens of people in raids following suicide bomb attack
  • On Sunday, a suicide bomber detonated an explosive device near an entrance to the Interior Ministry
  • Two police officers were slightly injured in the attack

ANKARA: Police detained at least 67 people across Turkiye on Tuesday in a sweep targeting people with alleged links to Kurdish militants, days after a suicide bomb attack in the Turkish capital.
Interior Minister Ali Yerlikaya said police carried out raids in 16 Turkish provinces, detaining 55 people suspected of being part of the “intelligence structure” of the outlawed Kurdistan Workers’ Party, or PKK. At least 12 other suspected PKK members were rounded up in a separate operation in five provinces, Yerlikaya wrote on X, the social media platform formerly known as Twitter.
The PKK has led a decades-long insurgency in Turkiye and is considered a terror organization by the United States and the European Union. Tens of thousands of people have died since the start of the conflict in 1984.
On Sunday, a suicide bomber detonated an explosive device near an entrance to the Interior Ministry hours before President Recep Tayyip Erdogan was set to address Parliament as it returned from its summer recess. A second would-be bomber was killed in a shootout with police.
Two police officers were slightly wounded in the attack. The suspects arrived at the scene inside a vehicle they seized from a veterinarian in the central Turkish of Kayseri after shooting him in the head, officials said.
The PKK claimed responsibility for the attack, according to a news website close to the group, while Turkish authorities identified one of the assailants as a PKK militant. Hours later, Turkiye’s Air Force carried out airstrikes on suspected PKK sites in northern Iraq, where the group’s leadership is based. The Defense Ministry said a large number of PKK militants were “neutralized” in the strikes.
Yerlikaya did not clarify whether the people rounded up on Tuesday were suspected of direct involvement in Sunday’s attack.


’Probable’ Israel strike kills six Syria fighters: monitor

’Probable’ Israel strike kills six Syria fighters: monitor
Updated 57 min 9 sec ago
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’Probable’ Israel strike kills six Syria fighters: monitor

’Probable’ Israel strike kills six Syria fighters: monitor
  • Syrian defense ministry said an Israeli strike on army positions elsewhere in the province had wounded two soldiers late on Monday
  • “Six pro-Iranian fighters were killed in a probable Israeli strike” on Monday evening, the Syrian Observatory for Human Rights said

BEIRUT: A “probable Israeli air strike” on Syria killed six pro-Iranian fighters in the eastern province of Deir Ezzor near the border with Iraq, a war monitor said Tuesday.
Separately, the Syrian defense ministry said an Israeli strike on army positions elsewhere in the province had wounded two soldiers late on Monday.
“Six pro-Iranian fighters were killed in a probable Israeli strike” on Monday evening, the Syrian Observatory for Human Rights said.
Israeli strikes targeted “three sites belonging to Iran-backed groups” close to the border city of Albu Kamal, the Britain-based monitor said.
Militias linked to Iran’s Revolutionary Guards have a heavy presence across Syria, especially around the border with Iraq.
During more than a decade of conflict in Syria, neighboring Israel has launched hundreds of air strikes on its territory, targeting Iran-backed forces and Hezbollah fighters as well as Syrian army positions.
Separately, the Syrian defense ministry said that shortly before midnight (2100 GMT) on Monday, an Israeli air strike had wounded two soldiers near the city of Deir Ezzor.
“The Israeli enemy carried out air strikes on some of our armed forces’ positions near the city of Deir Ezzor,” leaving “two soldiers wounded,” a ministry statement said.
Israel rarely comments on individual strikes it carries out on targets in Syria, but it has said repeatedly that it will not allow its arch foe Iran to expand its presence.
Last month, Israeli air strikes killed two soldiers on Syria’s Mediterranean coast, state media said.
In March, US strikes on Iran-linked groups in eastern Syria killed 19 people, including both Iran-backed fighters and Syrian soldiers, the Observatory said.
The war in Syria has killed more than half a million people since it broke out in 2011, following the bloody repression of pro-democracy protests.
It quickly escalated into a broader conflict that pulled in jihadists and foreign powers.


Tunisia rejects EU financial aid, casting doubt on an immigration deal

Tunisia rejects EU financial aid, casting doubt on an immigration deal
Updated 03 October 2023
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Tunisia rejects EU financial aid, casting doubt on an immigration deal

Tunisia rejects EU financial aid, casting doubt on an immigration deal
  • The July deal included a pledge of 1 billion euros in aid to Tunisia to help its battered economy, rescue state finances and deal with the migration crisis

TUNIS: Tunisian President Kais Saied on Monday rejected financial support announced by the European Union in September, saying the amount is small and goes against a deal signed three months ago.
Saied’s move could undermine the “strategic partnership” from July that includes measures on combating human traffickers and tightening borders, and which came during a sharp increase in boats heading to Europe from the North African nation.
The European Commission last month said it would disburse 127 million euros ($133 million) in aid to Tunisia as part of the deal to fight illegal immigration from Africa to Europe.
“Tunisia rejects what the EU announced, not because of the small amount ... but because the proposal conflicts with the memorandum of understanding signed in July,” Saied said.
The July deal included a pledge of 1 billion euros in aid to Tunisia to help its battered economy, rescue state finances and deal with the migration crisis.
The smaller amount announced by Europe 10 days ago, however, has frustrated Tunisian authorities struggling to improve public finances and raised fears among credit rating agencies that the government could default on foreign debts in coming months.
The dispute between the two parties has coincided with the arrival of record numbers of migrants from Tunisia and North Africa to Italy’s island of Lampedusa.
Tunisia last week postponed a visit by a delegation from the European Commission to discuss the details of the migration agreement.
Last month it also denied the entry of five members of the European Parliament’s foreign affairs committee for meetings over the political situation in Tunisia, saying it would not allow interference in its affairs.
Some European countries, including Germany, oppose the immigration deal, saying it does not address human rights issues and the political situation after Saied seized power, shut down the Tunisian parliament and began ruling by decree in what the opposition says was a coup.


UN migration chief voices concern over Mediterranean deaths, pledges new solutions

UN migration chief voices concern over Mediterranean deaths, pledges new solutions
Updated 02 October 2023
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UN migration chief voices concern over Mediterranean deaths, pledges new solutions

UN migration chief voices concern over Mediterranean deaths, pledges new solutions
  • US former White House adviser Amy Pope started as head of IOM on Oct. 1 at a time of record forced displacement around the world and high political tensions over irregular immigration

GENEVA: The new head of the UN migration agency has voiced concern that the deaths of migrants and refugees in the Mediterranean were being “normalized” and vowed to work with governments to provide options for economic migration to address the crisis.

US former White House adviser Amy Pope started as head of the International Organization for Migration or IOM on Oct. 1 at a time of record forced displacement around the world and high political tensions over irregular immigration.

Recently, an Italian minister and billionaire Elon Musk have criticized Germany for backing charities helping distressed migrants on the world’s most dangerous Mediterranean route, where 22,000 people have died or gone missing since 2014. Germany’s foreign ministry defended its policies.

Asked to comment on the debate, Amy Pope said: “Our biggest concern is that the deaths in the Mediterranean have been normalized and that people take for granted that this is just a cost of human movement.”

“If we are really going to stop people crossing the Mediterranean on rickety boats and dying as they do, we need to approach the situation far more comprehensively,” she said. 

She declined to comment directly on Musk’s remarks. Pope, who wants to build partnerships with private companies to manage migration better, won a tense election in May against her then-boss, becoming the first female head of the UN agency since it was created in 1951. 

IOM seeks to ensure humane and orderly migration and intervenes where needed. In her first press conference,  she vowed to work with countries that want to renew their labor forces like Spain.

“The evidence is fairly overwhelming that migration actually benefits economies,” she said, especially in wealthy countries with aging populations and low birth rates.

Pope said her first trip will be to East Africa to meet with the African Union Commission in Ethiopia and then to Brussels where she will meet with senior European officials as they search for a deal on handling irregular migration.