By Ece Toksabay and Nevzat Devranoglu
ANKARA (Reuters) -The World Bank's Turkey director said on Thursday that the economy was heading in the right direction but there was more to do, a week after the bank said it would double its exposure to Turkey to $35 billion over three years.
In an interview with Reuters, Humberto Lopez said that of the additional $18 billion funding, $6 billion was intended for the public sector and the remaining $12 billion was earmarked for the private sector.
Since June, the central bank has hiked its key interest rate by 1,650 basis points while the government has begun rolling back some of the unorthodox rules and regulations that had left credit and foreign exchange markets under extensive state control.
The policy U-turn, which hit the lira, is meant to arrest soaring inflation expectations and rebuild badly depleted foreign exchange reserves.
"There is more to do, but I think that the way they are doing it is the right one," Lopez said, adding that inflation may have to rise "in the short run" as a result.
The government's immediate challenge, he said, was calibrating multiple policies while in the longer term it was boosting productivity.
The World Bank announced its new Turkey funding plans last week.
Lopez said the $6 billion earmarked over three years for the public sector would focus on renewable energy, flood management, climate change adaptation and mitigation, and support for the export sector.