PROJECT BRIEF
BACKGROUND: Turkey is well into a new stage of public sector reform aimed at addressing the second generation challenges imposed by the economic crises of 2000 and 2001. In reaction to these crises, there has been a strong fiscal adjustment with significant primary surpluses in each year thereafter. The fiscal adjustment has been accompanied by on-going implementation of a comprehensive long term government program to modernize the institutions and procedures of public sector management. Nonetheless, the quality of fiscal adjustment needs to be improved and there is a need to address additional public sector reform challenges. Consequently, the authorities have designed and adopted a program of sustained medium-term legal, institutional, and structural developments aimed at promoting growth and improving social conditions. The PPDPL will support policy actions within the overall program in four connected areas, namely:
a) sustaining the current enabling macroeconomic framework;
b) reforming substantially the country’s social protection system which consists of social security, health insurance and social assistance,
c) continuing the on-going process of upgrading the public financial management and budget reforms, and
d) improving the administration and governance of the public sector.
PROJECT OBJECTIVE: A key objective is to move the social security system towards medium term sustainability while continuing to improve the institutional structure of public expenditure management. The reformed social protection system will aim to provide a comprehensive social protection system that insures against old age poverty, ill health, job loss and provides social protection for the poor. Addressing the cross-cutting issues that affect public sector performance will further improve public sector delivery of services. The reforms will help move Turkey’s macroeconomic framework and social protection system towards compatibility with the European Union.
PROJECT DESCRIPTION: The program supported by the Loan contains actions, milestones, and expected results in each of the above four broad areas of policy action. Accordingly, the PPDPL I Loan has been designed around four components which, in turn, contain conditions, triggers, and indicators critical to achieving the objectives of the government’s program as well as to measuring implementation progress and results achieved.
IMPLEMENTING and MONITORING: The proposed loan will follow the Bank’s disbursement procedures for development policy loans. The untied balance of payments support will be disbursed against satisfactory implementation of the program and not tied to any specific purchases and no procurement requirements will be needed.
BENEFITS: An enabling macroeconomic framework will continue to be an important underlying driver for the sustained growth experienced by Turkey since 2002. Bringing the social security system to actuarial medium term sustainability while continuing to improve the legal, institutional and systemic structures of public expenditure management will enable improved fiscal adjustment and will create the fiscal space required for the state to undertake important expenditures in areas such as infrastructure. In addition, this action is widely expected to increase the credit ratings of Turkey’s long term debt, which would reduce the cost of servicing such debt – creating, therefore, further fiscal space. The reformed social protection system will provide comprehensive insurance against old age, poverty, ill health, and more effective social assistance to the poor. Better focused regional development efforts and more effective provision of public services at the local level will assist in reducing large regional disparities, improving local service delivery and allowing for a more effective utilization of pre-accession funds from the European Union. The design and early implementation of systemic approach to support on-going anti corruption efforts will assist in reducing over the medium term this obstacle to economic and social development.
PROJECT STATUS: The PPDPL has been discussed by the Bank’s Board of Directors on June 29, 2006 and the US$500 million tranche has been disbursed upon effectiveness. The closing date of this loan is September 30, 2007.
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