May 17 2019

Turkish central bank cash transfer to be voted on in parliament – reports

Turkey’s parliament will consider a package of measures on the economy, including a step allowing the transfer of emergency central bank funds to the Treasury and Finance Ministry, local media reported.

The measure allowing the government to receive central bank money for the budget requires changes to legislation. The legal amendments were requested by the central bank before the funds were transferred, Dünya newspaper said.

The package will be urgently considered ahead of a June 23 rerun of elections for Istanbul mayor, local media said. The legislation to be presented to parliament is based on recommendations of various ministries and will first be approved at a meeting chaired by President Recep Tayyip Erdoğan, according to the reports.

The plans for the transfer of the central bank cash were first reported by Reuters on Monday. The news wire said that the government may draw on as much as 40 billion liras ($6.5 billion) because the budget balance was deteriorating more than expected.

The government has already drawn on 37 billion liras in central bank money in January. The bank’s profits for 2018 were transferred to the Treasury four months earlier than normal ahead of nationwide local elections held on March 31.

Turkey’s budget deficit widened more than five-fold annually in April to 18.3 billion liras, the Treasury and Finance Ministry said on Wednesday. The total deficit for the first four months now equates to 68 percent of the government’s year-end target of 80.6 billion liras.

Analysts are concerned that the government is compromising the independence of the central bank, which is allowing it to use its funds and refraining from raising interest rates to tame losses for the lira. The government and central bank deny the claims saying the institution is fully independent.

The lira has lost about 13 percent of its value this year, adding to a decline of 28 percent in 2018.

Hürriyet newspaper said the steps also include legislation allowing the restructuring of debt of the energy industry. Incentives for the tourism industry and a plan to allow the government to restructure money owed by toll road users will also be included, it said.