Sri Lanka has told hundreds of thousands of Russians and some Ukrainians staying in the country to escape the war that they must leave in the next two weeks, immigration officers said.

The immigration controller issued a notice to the tourism ministry asking Russian and Ukrainian people staying on extended tourist visas to leave Sri Lanka within two weeks from 23 February.

Just over 288,000 Russians and nearly 20,000 Ukrainians have traveled to Sri Lanka in the last two years since the war began, according to official data.

Commissioner-General of Immigration said the “government is not granting further visa extensions” as the “flight situation has now normalised”.

However, the office of president Ranil Wickremesinghe ordered an investigation of the notice to the tourism ministry in an apparent bid to prevent diplomatic tensions.

The president’s office said that the notice had been issued without prior cabinet approval and the government had not officially decided to revoke the visa extensions, reported the Sri Lankan newspaper Daily Mirror.

The exact number of visitors who extended their stay beyond the typical 30-day tourist visa duration remains unclear.

However, concerns have been raised over thousands of Russians and a smaller number of Ukrainians staying in the country for an extended period of time and even setting up their own restaurants and nightclubs.

Tourism minister Harin Fernando told Daily Mirror that the ministry has been receiving complaints of some Russian tourists running unregistered and illegal businesses in the southern part of the country.

Raids were conducted by the authorities following discussions with the Immigration Department, he said.

It comes amid a furious social media backlash over Russian-run businesses with a “whites only” policy that strictly bars locals. These businesses include bars, restaurants, water sports and vehicle hiring services.

In a bid to boost tourism and recover from its worst economic crisis since 2022, Sri Lanka began granting 30-days visas on arrival and extensions for up to six months.

In April 2022, the nation defaulted on its $46bn (£36 bn) foreign debt. The economic crisis triggered violent street protests for several months and ultimately culminated in the resignation of then-president Gotabaya Rajapaksa three months later.

Source: Independent

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Zaharoula Vassilaki, an organic farmer from Greece, gazes admiringly at a massive olive tree on her land, estimated to be over two centuries old. Despite being struck by lightning years ago, the tree continues to yield.

But climate change – in this case, the absence of deep winter – is proving too much for even this gnarled veteran to cope with.

“The climate has changed and the trees cannot cope with these big changes. We no longer have winter at all,” she told Agence France-Presse (AFP).

In mid-November, the temperature in the Halkidiki region of Polygyros, northern Greece, was still over 15 degrees Celsius (59 degrees Fahrenheit).

“I consider climate change the main challenge this season,” noted Nikos Anoixas, a board member of Doepel, the Greek national interprofessional organization for table olives.

“At this time, temperatures should be 10 degrees Celsius … the year is already lost, and we fear next year will be similar. I don’t even want to think what will happen if another such year follows,” Anoixas said.

Vangelis Evangelinos has been growing edible olives on his family land in Halkidiki, northern Greece, since childhood.

At 62, he does not recall adverse weather conditions such as the ones his area has endured this year – or such a poor crop – ever before.

“We’ve never had a year such as this,” Evangelinos told AFP, two months after the Thessaly region, to the south, was devastated by massive floods.

“The rainfall is intense and brief,” the opposite of what is needed to enrich the soil,” he said.

The warm weather has affected some 6 million trees in the region, according to producers and experts.

“This year, the phenomenon of ‘fruitlessness’ was very intense, but it is an issue that we have noticed mainly in the last five years,” said Vassilaki, 48.

The European Union’s olive production giants Italy and Spain have faced similar problems, pushing up prices.

Spain, the world’s biggest producer of olive oil, suffered a very difficult year in 2022, and drought this year has compounded the problem.

In Italy, this year’s olive harvest is down by an estimated 80%, according to producers.

The EU estimates global olive oil production will fall more than 26% in 2022-2023 compared to a year earlier, to just over 2.5 million tons.

In the EU itself, production is expected to drop 39%.

‘No winter at all’

“The old growers here say it is very important for the trees to rest in the winter. It takes about one to two months of good cold weather for the tree to rest … so that it can yield later,” Vassilaki said.

Athanassios Molassiotis, an agronomist and head of the arboriculture lab of Thessaloniki’s Aristotle University, said his team recorded an increase in temperature of two degrees during October, November and December 2022 compared to a year earlier.

This affected the olive buds “because we know that the tree bears fruit after cold winters, especially the Halkidiki variety, which has high requirements at low temperatures in winter,” he said.

“We found that in many trees, there was no flowering and therefore no fruit afterward,” Molassiotis said.

Halkidiki accounts for around half of edible table olives produced in Greece.

According to the regional Chamber of Commerce, more than 20,000 local producers cultivate 330,000 acres of olive trees in the area, generating an average of 120,000 to 150,000 tons of edible table olives annually.

More than 150 companies are active in olive processing and marketing, and more than 90% of the products produced are exported worldwide to Brazil, China, and Australia.

This year, however, the crop shortage has sometimes exceeded 90%, plunging sector entrepreneurs into despair.

‘Things will get worse’

“I’m afraid things will get worse in the future,” said Chamber President Yiannis Koufidis, noting the economic impact on growers has been “huge,” with a loss of some 200 million euros ($219 million) just in Halkidiki Prefecture alone.

In many cases, growers did not deem it worth the trouble to harvest their estates.

At the local olive processing unit, which also handles intake from across the country, management says production is down at least 60%.

A climate change study for the Halkidiki area in January showed the local average temperature is expected to increase by 1.5 to 2 degrees Celsius in coming years, according to the best-case scenario.

At worst, it could be 3 degrees.

Aristotelio University’s study also predicts less rain.

It warned that the overall “thermal stress” is ultimately expected to impact fruit quality.

And because Halkidiki is also one of Greece’s main tourism destinations, there is an added draw on the area’s water resources, said study author Christina Anagnostopoulou.

“Climate changes will happen. We need to learn and prepare to reduce the effects,” the climatology professor told AFP.

Koufidis said the Halkidiki chamber is working with the university to create a variant of the local olive variety that requires less wintry weather.

“It’s a very difficult project. But we can’t stand idly by,” he said.

Source: DailY Sabah

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The total reserves of the Turkish central bank are estimated to have reached a new historic peak in the last week, five bankers’ calculations showed on Tuesday, maintaining an upward trajectory after it embraced more conventional policymaking after the May elections.

The reserves jumped between $3.5 billion (TL 101.2 billion) and $3.8 billion in the week to Dec. 1 to exceed $140 billion, the calculations project. It would top the earlier record of $136.5 billion in the previous week.

The upward momentum has persisted since June after President Recep Tayyip Erdoğan appointed respected veteran policymaker Mehmet Şimşek as Treasury and Finance Minister and former Wall Street banker Hafize Gaye Erkan as the Central Bank of the Republic of Türkiye (CBRT) governor.

The new administration reversed a yearslong easing cycle and delivered aggressive interest rate hikes to cool demand and stem inflation.

Since June, the central bank embarked on a 3,150 basis-point tightening cycle – including hikes of 500 basis points in the last three months.

Including the latest rise, total reserves have surged $41.5 billion since June. Official data will be released on Thursday.

The five bankers provided Reuters with figures based on central bank balance sheet calculations.

Those calculations showed that net foreign exchange reserves were estimated to have fallen $1 billion last week to $35 billion after surging more than $40 billion since June.

On June 2, just after Erdoğan won reelection, the central bank’s net reserves were minus $5.7 billion, their lowest since data publication began in 2002.

Investors have been signaling a renewed interest in the major emerging market economy following the May vote.

Amundi, Europe’s largest asset manager, told Reuters it had started dipping its toe back into the Turkish lira. At the same time, central bank officials said funds are also beginning to arrive from large U.S.-based institutional investors.

Some large banks, including Deutsche Bank and JPMorgan, recommend that clients reconsider Turkish assets, with the former saying lira-denominated instruments may be one of the best trades among emerging markets in 2024.

Türkiye’s credit default swaps (CDS), which rose to 700 basis points at midyear, were down to 337 on Monday, data from S&P Global Market Intelligence showed.

The Treasury sold two-year benchmark bonds at a compound yield of 40.51% on Monday, up more than 30 points from the single-digit levels they had fallen during the elections due to regulations requiring banks to buy bonds.

Bankers said the latest auctions attracted foreign demand.

The Treasury will sell a four-year TLREF-indexed bond and a 10-year benchmark on Tuesday. It only plans TL 45 billion in domestic borrowing in December, but borrowing will speed up in January and February to total TL 388 billion.

The central bank has scheduled an “Investor Day” event for Jan. 11 in New York, adopting this format for the first time. While similar meetings are regularly organized by the bank, the theme of “Investor Day” will be introduced for the first time.

In early October, Erkan said there was a “multibillion-dollar offer letter on my desk that can directly enter our reserves.”

Before assuming the role of the first female governor of the CBRT, Erkan had worked in senior positions in the banking sector in the U.S., including 10 years at Goldman Sachs.

Meanwhile, S&P Global Ratings last week unexpectedly raised Türkiye’s sovereign credit outlook to positive from stable on subsiding twin deficits and affirmed its rating at “B.”

The move comes outside a strict ratings calendar and S&P said the deviation complies with recent policy adjustments.

The markets are anticipating further outlook and rating upgrades from credit rating agencies.

Source: Daily Sabah

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The Islamic Development Bank (IsDB) Group and Development and Investment Bank of Türkiye (TKYB) signed a $200 million (TL 5.79 billion) financing agreement to support the country’s earthquake-hit southeastern region on Tuesday.


“The financing will support Türkiye’s post-earthquake recovery efforts and revitalization of the agrifood sector in the most affected provinces,” IsDB Group said on X, formerly Twitter.

“The deal aims to implement innovative agricultural technologies to rebuild the agricultural infrastructure, increase food activities and expand sustainable development studies,” the TKYB said on X.

The signing ceremony of the agreement held at TKYB headquarters in Istanbul was attended by IsDB Group President and Chairperson Muhammad Al-Jasser, Deputy Minister of Treasury and Finance Osman Çelik, International Islamic Trade Finance Corporation (ITFC) CEO Hani Salem Sonbol and TKYB General Manager Ibrahim Öztop.

In his speech at the ceremony, Çelik said, “IsDB has been an important partner within the framework of our development agenda. We are very glad for our fruitful cooperation.”

“‘The Post-Earthquake Recovery and Agrifood Support (PERAS) project’ will serve the region affected by the earthquake by supporting the economic recovery of agriculture and agrifood sectors,” he added.

“Today marks a significant milestone in our enduring partnership with Türkiye. With this $200 million agreement, we are not just funding a project; we are investing in the resilient spirit of the Turkish people. This initiative is crucial in rebuilding and revitalizing the earthquake-affected areas, especially in the agriculture and agrifood sectors,” al-Jasser said.

“Our solidarity with Türkiye in these challenging times is unwavering as we collectively turn these challenges into sustainable development and resilience opportunities,” he added.

“I am also happy that the IsDB has brought our strategic partner OPEC Fund to join the IsDB Group in supporting this key project.”

The IsDB has provided nearly $12.6 billion to Türkiye through more than 554 socioeconomic development projects. These projects encompass a wide range of sectors, with key footprints in transport, health, education, clean and renewable energy, energy security, food security, infrastructure, international trade, private sector development, SMEs, Islamic finance and insurance.

On his part, ITFC CEO Sonbol remarked: “We are deeply committed to supporting Türkiye’s recovery efforts from the devastating earthquakes. Our contribution of $100 million aims to finance the import and pre-export needs of Turkish companies in critical sectors, including food security, agriculture and earthquake-affected enterprises, reflecting ITFC’s ongoing dedication to fostering sustainable economic growth and food security.”

“This joint financing resembles the resilient spirit of the Turkish people and a testament to the strength of international collaboration in times of need.”

Öztop also commented on the significance of this collaboration: “This comprehensive financing package provided in collaboration with IsDB, ITFC and OPEC Fund is a milestone in our efforts to address the challenges posed by earthquakes and the ongoing need for food security. We are extremely proud to have signed for this cooperation that will contribute to the recovery and growth of our country.”

The funds will be strategically utilized to support various initiatives within the PERAS project. These initiatives include rebuilding critical agricultural infrastructure, enhancing agrifood processing and distribution capabilities, and implementing innovative agricultural technologies to improve productivity and sustainability.

The investment is also aimed at developing robust market linkages to ensure the long-term viability and growth of Türkiye’s agricultural sector, thereby contributing to the overall economic recovery of the earthquake-affected regions.

A pair of powerful earthquakes hit the country’s southeastern region earlier this year, killing more than 50,000 people and causing widespread damage. Official estimates put the cost of the damage and reconstruction at around $100 billion.

Source: Daily Sabah

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Standard & Poor’s (S&P) on Tuesday said strengthening indicators of Türkiye’s economic rebalancing prompted the international credit rating agency to raise the country’s sovereign credit outlook to positive last week.

The surprise revisal of the outlook on the nation’s long-term foreign-currency issuer default rating from stable came outside a strict rating calendar as Türkiye has been shifting to more conventional policymaking since after the May elections. The S&P Global Ratings affirmed the country’s rating at “B.”

Frank Gill, managing director of Sovereign Ratings for Europe, Middle East and Africa (EMEA) at S&P, assessed the impacts of recent measures to enhance economic stability in Türkiye.

“Reflecting increasing evidence that the Turkish economy has indeed rebalanced, we have maintained Türkiye’s B credit rating while raising the credit outlook to positive,” Gill told an online meeting titled “Spotlight on Emerging Markets: Türkiye 2024 Outlook.”

President Recep Tayyip Erdoğan appointed the new economic administration after the May elections has orchestrated a reversal from a yearslong easing policy and aggressively delivered monetary tightening to cool overheated demand and rein in inflation.

Since June, the country’s central bank raised its key policy rate, the one-week repo rate, by 3,150 basis points to curb the inflation, which is running above 61% and is expected to rise through May next year before dipping. The increases included hikes of 500 points in the last three months.

Authorities have also begun to untangle a raft of financial regulations.

Gill offered insights into Türkiye’s third-quarter growth data, which last week showed the economy expanded by a more-than-expected 5.9% in the July-September period, driven by household spending.

“Overall, we believe there are signs that the implementation of orthodox monetary policies, the rebalancing of the economy, the increase in domestic savings, the slowdown in consumption, and consequently, the decrease in imports are beginning to benefit the economy,” said Gill.

“Our fundamental scenario is that the Turkish economy will benefit from a soft landing,” he noted.

Gill also outlined the conditions that would be sought for a potential future upgrade in Türkiye’s credit rating.

“We could raise the rating if we see improvements in the balance of payments results, an increase in domestic savings, an appreciation of the Turkish lira, and an increase in Türkiye’s usable foreign exchange reserves,” he said.

Anais Ozyavuz, the associate director of Financial Institutions Ratings for EMEA at S&P, evaluated the outlook of Turkish banks during the meeting.

Ozyavuz assured that Turkish banks have sufficient capital buffers and commented on the anticipated manageable capital loss due to the further depreciation of the currency.

“We expect some capital loss in banks due to further depreciation of the currency. But I believe these will be manageable conditions. Additionally, it is reassuring that most banks for the past two years have set aside free provisions that they can use in case of need,” she noted.

Source: Daily Sabah

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Türkiye and the United Kingdom are gearing up for negotiations to update and expand the scope of their existing free trade agreement, according to a senior official Tuesday.

The intention to launch discussions on a new, modernized deal was first announced in mid-July. Britain said it intends to start talks to refresh the deal to include services and the digital sector in any future agreement.

The U.K. already has a free trade agreement with Türkiye, which was rolled over when Britain left the European Union, which the sides said was now outdated.

That deal did not cover services, digital and data, but was considered the most important trade deal since Türkiye’s 1995 Customs Union with the EU.

Osman Koray Ertaş, Türkiye’s ambassador to London, emphasized the significance of the current agreement as the first free trade deal signed by the U.K. following its exit from the EU.

Ertaş stated that the aim is to update and broaden the scope of the current deal, highlighting that the trade volume between Türkiye, and the U.K., the world’s sixth-largest economy, reached $18.9 billion in 2022.

The U.K. is one of Türkiye’s top five export markets.

“The FTA has helped maintain the current conditions for entry into the United Kingdom, one of our most important export markets, and ensured that our exporters can sustain their competitiveness in this market,” said Ertaş.

Furthermore, the envoy indicated the mutual declaration of intent, made in a joint statement issued in July, to expand the scope of the deal.

“In the framework of the review clause in the agreement, we have started efforts to expand and update the existing FTA to include additional areas,” he told Anadolu Agency (AA).

“There is a strong political will on both sides in this regard. Work on the technical aspects of the negotiations is ongoing in both countries.”

Ertaş said the U.K. had initiated a consultation process to gather the opinions of the business community and the public, which will conclude on Jan. 5, 2024, before the negotiations start.

“We are continuing this process on our side. We hope to start negotiations as soon as possible once the necessary preparations in both countries are completed,” the ambassador noted.

Ertaş explained that the updated deal aims to cover areas beyond the trade in goods, including service trade, investments and e-commerce, stressing that they also aspire to secure additional concessions in the agriculture sector.

Officials earlier said any deal could address issues pertaining to goods, such as current quotas on Turkish exports such as olive oil, as well as expand into services, digital and data.

Emphasizing that the modernization will provide opportunities to further increase exports and mutual trade, Ertaş said: “Our commercial and economic relations will strengthen further in line with our strategic partnership.”

Source: Daily Sabah

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Türkiye has secured about $2.4 billion in financing from abroad amid efforts to address the aftermath of the devastating earthquakes that ripped through the country’s southeastern region in early February, a senior official said Wednesday.

The funding, sourced from various international banks, including the European Bank for Development, World Bank, European Investment Bank, Islamic Development Bank and the Asia Infrastructure Investment Bank, aims to facilitate the reconstruction and development of the regions impacted by the disaster.

Two major quakes on Feb. 6 devastated 11 southern and southeastern Turkish provinces, claiming the lives of more than 50,000 people and damaging or destroying hundreds of thousands of buildings across several cities.

Reconstruction is expected to cost more than $100 billion. Türkiye said it aimed to build 319,000 homes in the first year.

Treasury and Finance Minister Mehmet Şimşek emphasized the ongoing efforts to secure external funding for repairing damages caused by the Kahramanmaraş-centered tremors and the subsequent reconstruction of the affected areas.

Şimşek highlighted that the Asia Infrastructure Investment Bank had provided a $100 million financing package to the Türk Eximbank. This funding is earmarked for supporting export-oriented businesses in the affected provinces, specifically focusing on repairing and enhancing infrastructure.

“We have also secured $100 million in financing from the Islamic Development Bank to Türkiye Development and Investment Bank,” the minister told Anadolu Agency (AA).

He said this fund would be utilized to finance agricultural products and food security projects directed toward businesses in earthquake-affected regions.

“We have secured approximately $2.4 billion in foreign financing this year from various international institutions, including the European Bank for Development, World Bank, European Investment Bank, Islamic Development Bank and the Asia Infrastructure Investment Bank,” said Şimşek.

“We will steadfastly continue our efforts to secure suitable conditional external financing both by the end of this year and into the next. With these financial resources, we aim to support export-oriented businesses, agricultural products, and food security projects of enterprises in the provinces impacted by the earthquake.”

Şimşek earlier said the European Investment Bank had pledged some 400 million euros ($431,53 million) in financing to address quake-related challenges and contribute to the reconstruction of cities.

In March, an EU-led international donors’ conference raised more than 6 billion euros in grants and loans for Türkiye, much of which came from the European Commission, EU member states and the European Investment Bank.

Source: Daily Sabah

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Brussels (08/11 – 50)

On March 20, the IMF approved a $3 billion Extended Fund Facility (EFF) to support Sri Lanka amid its economic crisis. The approval is expected to pave the way for other financial institutions to extend support to the bankrupt South Asian country. IMF program was made possible largely due to the untiring efforts of the President Ranil Wickremesinghe.

The IMF links financial assistance to a country to policy reform, a conditionality that usually imposes political as well as economic changes in the recipient nation. The logic behind IMF conditionality is multifold. It is supposed to prevent moral hazard by governments that receive loans. These conditions allow the IMF to monitor the behavior of the recipient states and allegedly promote best practices and good governance.

Sri Lanka has been to the IMF 16 times before; five of these since 2000. The full amount of the IMF loan was not disbursed on six occasions because Sri Lanka did not fully comply with the conditions of the loans. This included the previous EFF in 2016, when the conditions imposed by the IMF built additional pressure on the domestic economy. There has been much skepticism about Sri Lanka adhering to the more stringent IMF conditions this time around.

Despite the skepticism that prevails among journalists and economists, the IMF is very happy about the progress Sri Lanka is making on the commitments it made as a part of the IMF’s four-year EFF to the country.

An IMF delegation, which was in Colombo recently to assess the progress of the agreement, is optimistic. IMF Director of Asia and Pacific Department Krishna Srinivasan told a press conference in Colombo on May 15 that the Sri Lankan government has shown “commitment to the reform effort” that is a part of the agreement with the IMF.  He added that the “authorities are making good faith efforts to negotiate with all the creditors, both private creditors and official creditors.”

Ranil Wickremesinghe took over as President of Sri Lanka in July 2022 when the country was in the middle of its worst economic and political crisis since independence in 1948. On March 20, 2023, the IMF approved a $3 billion Extended Fund Facility (EFF) to support Sri Lanka amid its economic crisis.

Peter Breuer, IMF’s Senior Mission Chief for Sri Lanka, Asia, and Pacific Department said they “see things developing more or less in line with expectations.”

Srinivasan added that Sri Lanka had to complete a number of prior actions before the IMF approved its bailout package. These actions were extensive and required a significant commitment from the Sri Lankan government.

Among these are cost-reflective of a number of goods and services that the government had subsidized for decades.  Sarwat Jahan, the IMF Resident Representative in Sri Lanka said the Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB) would have to recover their costs until the end of the IMF program.

The government met all these requirements, which shows that they are serious about implementing the reforms necessary to address the country’s economic crisis, Srinivasan said.

The conditions attached to IMF loans often involve actions aimed at discontinuing industry subsidies, avoiding exchange rate manipulation, adjusting budget priorities, and regulating wage levels. Leaders, who face diverse political limitations, differ in their willingness to engage in an agreement with the IMF and make compromises in these four areas.

Considering that IMF loan conditionality agreements usually involve implementing fiscal austerity measures, leaders with larger winning coalitions will encounter more challenges when attempting to negotiate an agreement for IMF financing.

On the other hand, when a regime maintains power through a narrower network of closely-connected supporters, he or she finds it easier to enter into an agreement with the IMF.

Miles Kahler, a senior fellow for global governance at the Council on Foreign Relations in Washington, DC, in his 1993 book chapter titled “Bargaining with the IMF: Two-Level Strategies and Developing Countries,” outlines two key aspects of domestic politics that influence the process of loan negotiations: firstly, the degree to which a technocratic elite is insulated from economic interests, and secondly, the frequency with which elites face political challenges like elections.

Another factor that can impede the formation of a loan agreement is the presence of multiple veto actors, such as a separation of powers or the existence of multiparty governing coalitions.

Kahler says that when a country has a higher number of veto actors capable of obstructing a loan agreement, the scope of domestic political consensus becomes narrower, resulting in increased negotiation costs for the IMF. Typically, the count of veto actors is determined by assessing the number of parties in a government coalition in countries where genuine political competition exists.

This explains why it was extremely difficult for former President Gotabaya Rajapaksa, who came into power through a coalition of populism and with the support of a number of interest groups, from big businesses to professional associations, to enter into negotiations with the IMF.

On the other hand, Wickremesinghe is the head of the United National Party, a political party that obtained around 250,000 votes from 15 million eligible voters. He has one MP in Parliament, Wajira Abeywardana, who is a staunch loyalist. Wickremesinghe is backed in parliament by the Sri Lanka Podujana Peramuna (SLPP), whose MPs depend on him for political survival and would vote for any legislation that he brings forth.

Sri Lankan legislators are entitled to several perks at the end of the full tenure of five years and most of the SLPP MPs that back Wickremesinghe are adamant on completing their terms. Wickremesinghe has also indicated that there will be no elections until the economy is stabilized and it is likely that the first election Sri Lankans will see is a presidential election, probably in 2024.

Therefore, Wickremesinghe can implement the IMF recommendations completely, as he is not answerable to any political coalition or interest groups. Neither does he face an election. Wickremesinghe’s personal ideology also aligns with that of the IMF. It is unlikely that these factors were ignored by the IMF when the loan was approved and when they evaluate whether Sri Lanka will adhere to IMF conditionalities.

Source

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Turkish central bank chief met with the management of the Banks Association of Türkiye (TBB) to evaluate the current situation in the banking sector, Anadolu Agency (AA) reported Thursday citing that the meeting addressed a number of topics, including reducing foreign currency conversion deposits.

The report cited Central Bank of Republic of Türkiye (CBRT) Governor Hafize Gaye Erkan saying that the transition to the Turkish lira continues “in accordance with the targets.” Erkan also emphasized that the “confidence in the disinflation path has increased” at the meeting.

According to a statement from TBB, the meeting addressed the reduction of foreign currency-denominated deposits in the banking system, the transition to the Turkish lira and the evaluation of practices related to rediscount and Investment-Linked Advance Credits (YTAK) within the scope of CBRT’s export and investment support.

“The positive outlook that emerged after the measures for the transition to the Turkish lira and the ongoing joint proposal work for its continuation, recommendations for the continued healthy functioning of credit flows in line with the inflation target and assessments for improving the positive trend in export and investment loans with CBRT were the main agenda items of the meeting,” the statement read.

“Additionally, an agreement was reached to establish a framework for the ongoing Community Investment Note and to conduct joint work,” the statement said.

Erkan, whose remarks at the meeting were included in the statement, touched upon the trend in both domestic residents’ savings instrument preferences and non-residents’ fund flows and stated “that the transition to Turkish lira continues in line with the objectives.”

The report cited Erkan as reiterating that they foresee the disinflation in 2024 in line with the path announced in the last Inflation Report, as the cumulative and delayed effects of monetary policy come into play.

It also noted that the CBRT chief stated the real sector and markets’ belief in the disinflation path “has increased” and “an improvement in expectations has begun to be reflected in pricing behavior.”

The pace at which consumer prices rose has started to ease after six successive months of interest rate hikes, taking borrowing costs to 40% from 8.5% after the new economy administration orchestrated a shift from a yearslong policy of low borrowing costs after the May elections.

The latest data shared by the country’s statistical authority on Monday showed that the consumer price index (CPI) rose to 61.98% last month from 61.36% in October, with so-called core inflation depicting a slowdown compared to September and October.

The core inflation, which excludes volatile food and energy costs, climbed 1.9% every month in November, from a 3.7% pace in October and 5.28% in September, the data from the Turkish Statistical Institute (TurkStat) showed.

Emphasizing the importance of determination and coordination in policies, Erkan expressed satisfaction with the banking sector’s efforts to support the transition to lira.

Alpaslan Çakar, Chairperson of the TBB Board of Directors, found the focus of monetary policy on reducing inflation very valuable and positive.

Çakar highlighted the positive results of practices that further strengthen the economy, indicating that investments and growth continue, the outlook has turned positive, predictability has increased and risk premiums have decreased.

The Turkish economy expanded by a more-than-expected 5.9% in July-September compared to a year ago, driven by household spending.

At the same time, S&P Global Ratings revised Türkiye’s long-term sovereign credit rating to positive from stable last week, citing “economic rebalancing” as the rationale for the surprise upgrade.

In addition, Çakar also noted that thanks to maintaining stability and confidence in the markets, the increase in demand for Turkish lira would support strengthening the banking sector’s contribution to financing growth through investment, employment, production and exports in a balanced and high-quality manner.

Source: Daily Sabah

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While the Turkish economy is moving in the right direction, showing positive signs noted by credit rating agencies and other financial institutions, seeing the full impact of the nation’s monetary policy will require patience, the World Bank’s director for the country said in an interview with Anadolu Agency (AA).

Speaking to AA on the sidelines of the COP28 U.N. climate conference in Dubai, United Arab Emirates (UAE), Humberto Lopez said the World Bank was not alone in its support for Türkiye’s economic course under the current conditions

“If you look at the credit rating agencies, some of them have already moved Türkiye’s outlook upward,” he said, pointing to a decision last week by the New York-based S&P, which revised the country’s credit outlook from stable to positive.

“Some of the investment funds like Deutsche Bank or JPMorgan are saying that next year is going to be very hot in the bond market in Türkiye,” Lopez added.

“These organizations see that things are going in the right direction,” he said.

He also noted that the rate for credit default swaps (CDS) in Türkiye is now below 350 basis points, indicating a major improvement in the perceived risk level of the country from a level of more than 550 six months ago.

As the economy stabilizes, this will have the potential to attract more financing, the World Bank official said, adding: “One of the beauties of this is that you can enter into a virtual circle. On the one hand, you have an investment that is coming because the situation is becoming stabilized. On the other hand, as the resources are coming, it would be easier to stabilize the situation.”

However, Lopez also stressed the need for perseverance and patience for the impact of the monetary to fiscal policy measures taken to materialize fully, referring to the tightening and implementation of policies of the new economic administration to counter inflation.

“We have reached a point probably where markets would start thinking that the increase in the interest rate is going to reach the limit,” he said.

The bank has been raising its policy rate, the one-week repo rate, for six months from a low of 8.5%. Last month’s hike was 500 basis points, up to 40% from the previous 35%.

Türkiye’s annual inflation edged up to 61.98% in November, according to official data released Monday. The figure accelerated from 61.36% in October.

On the bank’s forecast for inflation in Türkiye, he said: “We are expecting that inflation figures will be peaking in the middle of 2024 and then it will start declining. We think the inflation will be between 35%-40% by the end of 2024 and drop to around 15% in 2025.”

“Clearly, this is all subject to what is also happening in the global economy,” he added.

In addition, Lopez also touched upon the financing program implemented by the lender in Türkiye, recalling that the bank group announced in September it would provide an additional $18 billion in funds over the next three years. According to Lopez, about $12 billion of it will be going to the private sector.

“We are now starting the process that we call our strategic planning. We are putting forward this for the next three years,” he said, noting that up to $750 million of the $18 billion total would be provided for electricity transmission projects in Türkiye.

Renewable energy growth

One of the significant areas receiving investment in Türkiye is renewable energy, with the country aiming to boost its capacity significantly over the coming years.

“We are very excited to hear Türkiye’s plans to increase its renewable energy capacity by 60 gigawatts in the next 12 years, more or less 5 gigawatts per year. This is one of the biggest efforts in this area that the world has seen in emerging economies,” said Lopez.

Türkiye’s current installed capacity hit 106 gigawatts and the country aims to increase this to 190 gigawatts by 2030.

Renewables are expected to provide for most of this growth, which Lopez said would require costs of around $100 billion over 12 years, including some $80 billion for generation, $10 billion for transmission and $10 billion for distribution.

He added that of the total investment needed, $90 billion will have to come from the private sector.

Moving toward the net zero emissions target by 2053 and building resilience in the sector will need around $640 billion in net present value, Lopez explained.

“This is a pretty significant amount of money. And this will require both the private and public sectors and us to work together to mobilize this amount of resources.”

Source: Daily Sabah

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