Türkiye on Monday announced it had secured financing worth $6.3 billion (TL 203 billion) from the Islamic Development Bank (IsDB) over the next two years, in what the top economy official said indicated a robust momentum in the flow of external resources to the country.
"The Islamic Development Bank Group, which has provided $12.9 billion in financing to our country since 1975, will offer $6.3 billion in financing during the 2024-2026 period to support our development priorities," Treasury and Finance Minister Mehmet Şimşek said.
The financing is part of the IsDB's Country Strategy, regulating the group's activities in Türkiye for the next two years, which has been approved on the sidelines of the Annual Meetings held in Riyadh to mark the 50th anniversary of the bank.
Şimşek attributed the recent increase in foreign financing inflow to the government's medium-term program (MTP), a road map unveiled in September to help the nation combat soaring inflation, rebuild foreign exchange reserves, and reduce chronic current account and budget deficits to surpluses.
"Thanks to the economic program we have implemented, the flow of external resources to Türkiye continues to be strong," the minister, in the Saudi capital to attend the IsDB meetings, told Anadolu Agency (AA).
In a pivot after last year's presidential and parliamentary elections, Türkiye departed years of easing policy. It delivered aggressive monetary tightening, mainly seeking to cool domestic demand, the main driver of inflation.
Out of the two-year financing, $2 billion will come from the IsDB, $900 million from the International Islamic Trade Finance Corporation (ITFC), $300 million from the Islamic Corporation for the Development of the Private Sector (ICD), and $3.1 billion from the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC).
"The financing provided will be utilized to support activities across various sectors, including education, health care, transportation, finance, agriculture, industry, energy, and infrastructure," Şimşek said.
'Confidence, predictability'
In a separate post during the weekend, Şimşek addressed allegations Türkiye had difficulties ensuring funding from abroad.
Thanks to "increased confidence and predictability," the nation has been able to secure longer-term and more cost-effective external financing from international markets, the minister stressed.
"While there was a net portfolio outflow of $2.9 billion in the first five months of 2023, there was a net portfolio inflow of $16.8 billion from June 2023 to February 2024," he added.
During the same period, Şimşek said the debt rollover ratio increased from 96% to 149% in banks and from 73% to 118% in the real sector. Additionally, banks raised $10.7 billion, including $3.7 billion in capital-like instruments, while the private sector issued $1.6 billion in Eurobonds in the first four months of the year.
On Monday, Şimşek underscored the alignment of the IsDB Country Strategy with Türkiye's 12th Development Plan and Medium-Term Program (MTP).
"It encompasses all entities within the IsDB Group, namely the IsDB, the Islamic Development Bank, the International Islamic Trade Finance Corporation, the Islamic Corporation for the Development of the Private Sector and the Islamic Corporation for the Insurance of Investment and Export Credit," he said.
Türkiye ranks fourth among countries utilizing concessional loans from the bank, according to Şimşek. From 2021 to 2023, the IsDB Group approved approximately $800 million in financing for Türkiye, the minister added.
On Saturday, the IsDB separately announced that 120 million euros ($128.5 million) had been approved for the Türkiye Nakkaş-Başakşehir Motorway Project, a subsection of the larger North Marmara Motorway government initiative.
The main project aims to provide an alternative Bosporus crossing, significantly reducing traffic congestion, travel times, and greenhouse gas emissions.
After the announcement of the MTP, the World Bank said it intended to increase its exposure to Türkiye to $35 billion within three years.
The Türkiye Country Partnership Framework (CPF), through which the bank will provide an additional $18 billion in financing on top of its existing $17 billion exposure in the country, was approved by its board of executive directors earlier this month.