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Mar 15 2019

Turkey budget deficit widens eight-fold before election

Turkey’s budget posted a deficit of 16.8 billion liras ($3.1 billion) in February, widening more than eight-fold from the same month a year earlier.

The deficit jumped from 1.9 billion liras in February 2018 as spending surged, according to data published by the Treasury and Finance Ministry on Friday.

Turkey has pledged to curb expenditure as part of measures to rescue the country from a currency crisis that peaked last August, which helped provoke an economic recession. But the ruling Justice and Development Party (AKP) is spending more ahead of local elections on March 31.

Expenditure jumped an annual 33 percent to 83.7 billion liras, rising at more than three times the rate of revenue, which increased 9.7 percent to 67 billion liras. Excluding interest payments on debt, spending rose 23 percent to 69 billion liras.

Tax revenue climbed 9.4 percent to 57.5 billion liras, thanks to a 19.7 percent increase in business taxes, which rose to 18.2 billion liras. But the income lagged annual consumer price inflation, which stands at almost 20 percent, meaning real overall tax revenue has contracted.

Sales tax revenue slumped 19.5 percent to 3.74 billion liras, while income from special consumption taxes, a key revenue stream for the government, rose 5.5 percent to 10.5 billion liras.

Turkey had posted a budget surplus of 5.1 billion liras in January, prompting Treasury and Finance Minister Berat Albayrak to say the government was following prudent fiscal policies.

But the January budget surplus came after a six-fold increase in one-off revenue items of 41.3 billion liras, which included payment of the 2018 profits of the central bank, brought forward from April. Spending surged 63 percent to 91.9 billion liras in the month, while tax revenue rose 7.1 percent to 55.7 billion liras.

The January windfall from the central bank and other one-off measures such as an amnesty on illegally constructed buildings meant the budget deficit for the first two months of 2019 totalled 11.7 billion liras compared with a deficit of 201 million liras in the same period of last year.