EBRD increased Turkish-lira financing in 2018 as currency volatility hit private sector

By Olga Rosca
@olgarosca


  • EBRD stepped up local currency financing in Turkey to a record €331 million
  • Bank invested €1 billion in 34 projects in Turkey in 2018
  • EBRD’s €7 billion Turkey portfolio is largest among 38 economies where Bank invests

The EBRD increased its support for local currency financing in Turkey to a third of its total investment in the country in 2018, a particularly challenging year when an economic slowdown and a dramatic currency depreciation affected many private sector companies.

In a significant increase from €228.8 million in 2017, the EBRD extended the Turkish lira equivalent of €331 million in 13 transactions with Turkish companies last year.

Geopolitical tensions, waning investor sentiment, monetary policy tightening and a stronger US dollar, saw the lira at one point lose almost 40 per cent of its value against the dollar since the start of 2018, leaving the country’s private sector in a vulnerable position.

Arvid Tuerkner, EBRD Managing Director for Turkey, said: “At a time of high volatility in the lira, the right financing mix, including local currency financing, is critical for Turkish companies. Deepening local capital and currency markets – through investments and support for reform – remains among our top priorities in Turkey.”

The Bank provided Turkish lira financing to companies such as Migros, a supermarket chain, Entek, a Koc Holding unit privatising hydropower stations, and OEDAS, an electricity distributor in western Anatolia. Boosting the development of local capital markets, it also subscribed to lira-denominated bonds by Migros, backed an initial public offering of Sok, a discount grocer, and invested in Akis, a real estate investment trust, in an accelerated book building transaction.

The EBRD maintained its focus on projects that improve the quality of life across the country. 2018 saw the Bank’s third infrastructure project in Izmiran €80 million loan for the construction of a new metro line. The Bank also financed the modernisation of the water supply system in Hatay, a city on the Syrian border, where the population has increased sharply following an influx of refugees.

Already a leading financier of renewables in Turkey, the Bank backed four new windfarms and nine solar plants to be developed by green energy firm Akfen Renewables, bringing the EBRD-financed renewable capacity in Turkey to 2,865 MW.  

The Bank also provided long-term financing for two leasing firms, Garanti Leasing and QNB Finans Leasing, to expand access to finance for energy efficiency measures.

More than half of the EBRD’s 2018 investment in Turkey was in support of sustainable use of energy. The financing is a step to help Turkey reduce primary energy consumption by 14 per cent by 2023, a goal set out in the country’s National Energy Efficiency Action Plan, which was developed by the Ministry of Energy with the support from the EBRD and adopted by the government in 2018.  

In addition, Turkey became a donor to the EBRD in 2018 and committed €25 million to co-finance socially-important Bank-led projects which boost economic growth and improve people’s lives in the country and the wider region. This is the first time Turkey has signed a bilateral donor agreement with an international financial institution.

The EBRD also partnered with Turkey’s Kredi Garanti Fonu (KGF), a credit guarantee institution, to expand financing for small and medium-sized businesses led by women. The partnership will enable the Bank to unlock €300 million in new financing to local lenders to support women’s entrepreneurship in a country where only 34 per cent of women participate in the workforce.

Over the past three years, Finance and Advice for Women in Business, an initiative developed by the EBRD with the European Union and the Turkish government has helped 18,000 women in 79 of the 81 Turkish provinces to grow their businesses through a combination of finance, advisory services and coaching. 

The EBRD is a major investor in Turkey. Since 2009 it has invested over €11 billion in various sectors of the Turkish economy, with almost all investment in the private sector. The EBRD’s €7 billion Turkey portfolio is the largest among 38 economies where the Bank invests.

Overall, the EBRD overcame significant economic challenges in a number of countries to maintain an excellent level of investment and backing for reforms in 2018. It financed 395 projects worth a total of €9.5 billion, very close to the 2017 record of €9.7 billion.

At its Annual Meeting in Jordan in May 2018, EBRD shareholders asked the Bank to do even more with existing capital to increase investments in existing countries to help achieve Sustainable Development Goals the international community has pledged to deliver by 2030. At the 2019 Annual Meeting, in May in Sarajevo, shareholders will decide whether to investigate possible further expansion -- outside the current regions of activity.