Responses of IFI’s to Covid-19 – financing Turkish infrastructure projects – Part 3 / BSTDB

International Financial Institutions worldwide are taking unprecedented actions to help their countries of operations to recover from the pandemic and safeguard the delivery of vital services and infrastructure. Recently, EEL Events have spoken with multilateral development banks active in Turkey on their responses and preparedness to the COVID-19 crisis. See what they have to say…

Hasan Demirhan,
Vice President Banking, BSTDB


The COVID-19 pandemic has an important impact on Turkish infra projects as such similar impacts are observed around the world. There are two ways to evaluate: 1) the projects under construction yet to be finalized or finalized. 2) the projects in the pipeline yet to be launched.

The first group of projects have already completed necessary stages such as obtaining funding, signing financing contracts, identifying bidders and contractors. Mainly the completed infra projects have been impacted worse than other sectors in Turkey because of limited usage of the facilities due to lockdown for more than two months. As known, the project companies are entitled to charge users directly for the duration of the contracts for a highway where the company collects tolls directly from users or a unitary fee in which the public authority pays the project company an amount defined in the contract, especially for hospitals and airports. What we observed that some of the project companies have already applied for restructuring their loan. In addition, most of the infra projects financed through the country’s PPP program have indirect or contingent support within the broader financial mechanisms provided by the government to encourage the financial markets to lend into projects. One of the financial mechanisms is the revenue support by the government promises to provide funding to the project company to make up for revenue shortfalls. Therefore, it has been observed that the transportation sector, including airports, ports, roads and tolls, light rail, urban passenger rail, metro, trams, railways and other transportation infrastructure projects have suffered during the lockdown period. As per the PPP contingent support program, the relevant authorities have already provided significantly extra financial support to the infra project companies to cover their shortfalls for satisfying their debt-service obligations. There are different approaches in different sectors to cover the shortfalls. In the energy and power sector, Power Purchase Agreements (PPAs) are commonly used methodology implementation agreements and relieved the project companies from the financial distress during the lockdown period of the COVID 19.

There are some projects like the Ankara-Izmir High-Speed Rail that are still under construction. It is expected that there will be a delay for completion but there is no issue on finding a side due to the fact that necessary financing has been obtained for the constructions.

Regarding the second group of the infra projects, it is expected to hold them till further clarity in overall economic developments and the financial markets. Each country including Turkey has already developed a comprehensive economic policy response to the COVID-19 pandemic in order to deal with first health emergency needs and then prepare the ground for the economic recovery.


Currently, no industry can escape the disruption of the Pandemic. It is pushing the world economy into an unavoidable recession. After the 2008 financial crisis, the world is now facing not only the financial crisis but also economic crisis. It is observed that economic contraction becomes a recession or worse, a prolonged depression COVID-19. The challenges under current conditions for Turkey are volatility and quick fall in financial markets and financing gap due to shrinking fiscal revenues and Covid-19 expenditures. Additionally, liquidity crunch, disruptions in international trade, and transport, weakening of foreign exchange reserves, devaluation of the local currency, fall in export/tourism revenues are the main causes for concern of the Turkish economy. Altogether all may have effects on Turkey’s infrastructure industry, including major disruption to supply changes and possible difficulty sourcing materials. Nevertheless, the decline of commodity prices, especially oil prices, is expected to have a positive impact on the balance of payment for Turkey, especially given the vast amount of oil being imported.

The overall impact on the infra sector is not different from the economic impact. The sector is facing challenges of its own in the short term and long term. The immediate effects have been observed on the incomes generated from transport, tourism and travel because of domestic and international restrictions in order to slow the spread of infection. There is a significant slowdown of the projects currently under the construction because of the uncertainty of demand or access to financing. Therefore, there will be an important delay in project start dates and stalling construction progress with potential longer-term economic repercussions for the country. There is disruption in visibility over the project’s third-party supply chain and the supply delays. Also, the most critical materials, equipment, products and tier-1 suppliers have become significantly vulnerable during the pandemic period. Financially, the most imminent challenge for the sector players remains shortfalls of working capital and shortage of liquidity. Besides, financial institutions have difficulty collecting their repayments as a result of decreasing trust as the crisis continues. Also, a decrease in income resulting from reduced transaction volumes is expected. All of this will impact liquidity, the amount of assets with risk, profitability and capital adequacy negatively.

Consequently, the infrastructure is one of the worst-hit sectors among others. Especially airlines and transportation companies are naturally expected to file bankruptcy if there is no support provided. Some actions have been taken from governments and financial institutions to mitigate such risks. Nevertheless, the result of such measurements is yet to be seen.


As indicated in Black Sea Trade and Development Bank’s (BSTDB) Press release published on 24 March 2020, BSTDB has already taken actions to reduce the negative impact of the pandemic. It stated that “BSTDB is committed to making best efforts to continue supporting our clients and Member Countries. The Bank intends to refocus its financing of approximately EUR 900 million, planned for new operations in 2020, to assist the sectors and industries most affected by the turmoil caused by the COVID-19 infection. In the current critical conditions and changes in market perceptions of risk and liquidity, the Bank continues to assist the small and medium-sized enterprises, the most vulnerable segment of companies, and to provide the support that our Member Countries and businesses need. We will offer additional technical assistance to affected clients to facilitate project preparation, including business plans, feasibility studies, environmental impact assessments, etc.” In addition, BSTDB will explore all co-finance opportunities with other development banks in the shared member countries to be more relevant and create a significant impact.

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