PROGRAMMATIC ELECTRICITY SECTOR DEVELOPMENT POLICY LOAN

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The First Programmatic Electricity Development Policy Loan Program (PEDPL-1) for Turkey supports the implementation of the Government's program for the electricity sector. The Second Programmatic Electricity Development Policy Loan (PEDPL-2) will build upon the initial implementation of the program. The loan is one of the cornerstones of the Country Partnership Strategy (CPS) FY08-11 which fully integrates the Bank's activities for FY08-11 into the Government's ninth development plan. Measures undertaken by the Turkish administration and supported under the program are expected to contribute to sustaining the growth experienced by Turkey since 2002, generating employment, supporting the competitiveness of Turkish industry, and improving the living standards of its people. The program carries several risks. From the macroeconomic side, Turkey faces economic challenges as a result of the global financial crisis. In particular, high external financing needs, mainly in the private sector, make Turkey vulnerable to persisting international illiquidity and capital outflows. While a single-party Government with a strong parliamentary majority creates a favorable environment for reform, some political risks to the program remain, including: (i) continuing domestic political differences; and (ii) geopolitical events in neighboring regions. On the program side, all PEDPL-1 supported reforms have been implemented, and the risk of reversal is low. However, there are sector specific risks: delays in implementation of the remaining envisaged reforms, delays in attracting private investment, slow progress of energy efficiency measures contributing to continuing high electricity demand growth, and external developments that result in the policy actions failing to achieve a significant level of improvement in the electricity supply demand imbalance