The chief of the European Bank for Reconstruction and Development (EBRD) said on Thursday that Türkiye must "stay on course" in its inflation fight, and she applauded measures taken by the central bank this week to tackle market fallout from the war in the Middle East.
Odile Renaud-Basso, the EBRD's president, said the bank's investment in Türkiye will remain "very high" this year, and that it was looking into potentially funding a big-ticket high-voltage electricity transmission system that Ankara plans over the coming decade.
"The central bank has already taken some measures very quickly," Renaud-Basso said. "There is still some way to go and what is important is to stay on course and really finish this work," she told an interview with Reuters at the EBRD's offices in Istanbul.
Reassuring meetings with officials
Renaud-Basso was speaking at the end of a four-day visit that included meetings with Treasury and Finance Minister Mehmet Şimşek and Vice President Cevdet Yılmaz.
"Everything I heard reassured me (that) this progress is steady," she said of inflation-fighting measures.
The Central Bank of the Republic of Türkiye (CBRT) has slashed interest rates by 900 basis points since mid-2025 to 37% as annual inflation slowed from over 40% at the beginning of last year to just over 30% in January.
But a rise to 31.5% last month signaled a slowdown in disinflation, and an escalating U.S.-Israeli war with Iran threatens to drive prices higher.
In response, the central bank already took a series of steps this week, including some $8 billion in foreign currency sales on Monday, pushing the market overnight rate to about 40%.
Asked about Ankara's plans to invest some $30 billion in a high-voltage electricity transmission system over the next decade, Renaud-Basso said the EBRD is "looking into that."
"It's part of the discussion we have with the government," she said.
The EBRD committed last year a record 2.7 billion euros ($3.13 billion) to 54 projects in Türkiye, which is the number-one recipient of EBRD's funds. This year's funding could also include energy and renewables projects.
Türkiye aims to quadruple renewable energy generation capacity by the end of 2035 and build new nuclear power plants. The planned network would transfer electricity to consumption centers and also send surplus electricity to its European neighbors.
Türkiye has said it is in talks with the World Bank to secure up to $6 billion of funding for upgrading electricity transmission infrastructure.
Iran conflict risk to economic growth
Renaud-Basso said the widening U.S.-Israel war on Iran is a risk to economic growth, but noted that the fallout depends on how long the conflict lasts.
She said the conflict "can reduce risk capital" for the region – but that apart from Lebanon, the fallout thus far was contained.
"For the time being, it's limited," she said, adding that "the risk is on the downside."
Last week, the EBRD pegged growth for the 41 countries it covers at 3.6% for this year and 3.7% in 2027, boosted by spending on big infrastructure projects in Europe, but offset by U.S. tariffs and trade uncertainty.
The war has effectively closed the Strait of Hormuz, a key shipping artery, sending crude prices up some 12% – and sounding an alarm for many of the energy-importing countries in which the EBRD works.
Renaud-Basso said that the length of the closure of the Strait of Hormuz and the duration of oil and gas price spikes were key, but that high global gas stocks could help cushion the blow.
The exception, however, is Lebanon, which she said is "very much at the core" of current turbulence.
"There we can expect quite a significant impact on the economic situation and broadly," she said.
In Ukraine, Renaud-Basso said international funding for the year is unlikely to change despite the new conflict.
But more broadly, she said an extended spike in global energy prices could also drive inflation higher – making it tricky for central banks to cut interest rates.
"This is a new challenge in terms of monetary policy. I think that we need to be careful," Renaud-Basso said.