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İstanbul mayor to seek funding overseas after domestic lenders stop extending routine loans

Ekrem İmamoğlu (R) is seen in front of famous Chatham House in London. PHOTO: T-VINE

İstanbul’s new mayor has said Turkey’s state banks stopped making routine loans to the city after a June election in which he pulled off a shock victory over President Recep Tayyip Erdoğan’s ruling party, forcing it to borrow from abroad, Reuters reported.

Mayor Ekrem İmamoğlu of the main opposition Republican People’s Party (CHP) told reporters on Sunday that Turkey’s largest city needs more than 20 billion lira ($3.5 billion) in financing, more than half of it for stalled metro projects.

İmamoğlu, back in İstanbul after a fundraising tour of European capitals, said all municipal transactions and salary payments were made through state banks.

The city would increasingly lean on foreign lenders and private Turkish banks, he said.

“State banks are not even extending routine loans after the elections to the Istanbul Municipality. The doors of state banks are closed to us,” İmamoğlu said of the city of around 16 million.

“I condemn the managers of these banks who show this kind of attitude towards the municipality. I have been patient for the past five months,” he added.

The Treasury did not immediately respond to a request to comment on the lending by state banks, which account for about 40 percent of overall Turkish loans and deposits.

In a June re-run poll, İmamoğlu’s decisive victory ended 25 years of rule in İstanbul by the Islamist-rooted Justice and Development Party (AKP) and its predecessors, handing Erdoğan one of the most painful setbacks of his political career that began as mayor of the city.

İmamoğlu, seen by some as an eventual presidential contender for the secularist CHP, has visited Paris, Berlin and London this month in part to seek financing for underground rail projects stalled for two years.

He secured an 86-million-euro loan deal from the French Development Agency, and a 110-million-euro loan from Deutsche Bank that he announced on Sunday.

According to research published in January, the banks have “systematically” adjusted lending patterns around elections in the last 15 years to boost provinces where incumbent mayors from the ruling party faced tough challenges.

State banks also cut lending in provinces where opposition mayors faced tight elections, said the paper, published by researchers at the European Bank for Reconstruction and Development and the London School of Economics.

İmamoğlu said İstanbul had 28 billion lira in debt and needed permits from Turkey’s Treasury to issue municipal bonds.

“It would not be right for them not to give permissions,” he said.

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