June 26, 2024

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Istanbul: Moving forward with privatization to finance the development plan – economic article

Istanbul: Moving forward with privatization to finance the development plan – economic article

The municipal authorities in Istanbul are turning to privatization, selling debt and financing from banks and institutions as part of a plan to raise funds to develop the city’s economy and infrastructure.

The privatization process of Egdas, which operates Istanbul’s gas network, is already underway, while there are also ideas to sell a large proportion of Ispark municipal parking lots, according to Bloomberg. The same sources said that in addition to the companies Egdas and Ispark, other stake sales may be in the Hamidiyeh Water Bottling Company and the Halak Ekmek Bread Manufacturing Company.

Türkiye: Three-year austerity program to combat inflation

In addition, the city plans to raise $1.1 billion this year from capital markets, commercial banks and the European Bank for Reconstruction and Development (EBRD). Among other things, it is planned to issue green bonds from which Istanbul wants to raise funds worth $225 million to meet its needs.

Economic movements with political repercussions

These movements also have a political dimension. Now that the Turkish opposition has a majority in the Istanbul City Council, local government officials see an opportunity to boost fundraising plans to bolster the city’s infrastructure and make the opposition more popular there.

Funding for Türkiye’s major cities became a major issue in the municipal elections in March. The leader of the opposition Republican People’s Party, Ozgur Ozil, accused President Recep Tayyip Erdogan of not allocating sufficient funds to some major cities as punishment for not obtaining a majority of votes there. However, the government in Ankara denies this accusation.

For his part, Turkish Finance Minister Mehmet Şimek approved the sale of green bonds to Istanbul worth $715 million late last year, and is expected to approve financing for four metro projects, including a new line worth $925 million, according to Vural.

During this period, Simsek is making efforts to restore confidence in the Turkish economy, holding a series of meetings with international investors. It now remains to be seen how much international attention Istanbul will receive in these efforts.

With 10 billion assets value

One of the city’s crown jewels is Edgas which is valued at up to $10 billion. The authorities intend to gradually reduce their stake in the company from 90% today to less than 20%, according to the head of financial services in the Istanbul municipality, Neslihan Vural, who spoke to the international news agency. She said that the IPO of Igdas has already begun implementation.

Investment needs

Istanbul can allocate funds from such moves in many directions. Among other things, the city is seeking funding for a second wastewater treatment and energy conversion plant. Bloomberg sources said there are also needs for investments in the subway network, while the city also needs 10,000 taxis to increase the current fleet by 50%.