Aug 15 2019

Turkey posts July budget surplus on central bank windfall

Turkey’s budget surplus increased almost nine-fold last month after the central bank transferred tens of billions of liras in emergency funds to the government.

The budget had a surplus of 9.9 billion liras ($1.8 billion) compared with a surplus of 1.13 billion liras in July last year, the Treasury and Finance Ministry said on its website on Thursday.

“Other income”, which included the central bank transfers, surged to 35.1 billion liras from 7.48 billion liras a year earlier.

Turkey has drawn on central bank funds in January and July to help cover a surge in expenditure and a slump in tax revenues. The government has slashed taxes and raised spending to help lift the country out of an economic recession sparked by a currency crisis last summer.

Spending in July jumped by an annual 38 percent to 83.5 billion liras, the ministry said. Tax revenue climbed 7.2 percent to 58.3 billion liras. The figures exclude the erosive effects of inflation, which stood at an annual 16.7 percent last month.

Income from value-added taxes rose 6.1 percent to 4.71 billion liras. Revenue from special consumption tax, which the government collects on sales of many consumer goods, fell 1 percent to 12.2 billion liras.

The budget deficit for the first seven months of the year widened to 68.7 billion liras from 45 billion liras a year earlier. Thanks to the July surplus, it narrowed from 78.6 billion liras in the first six months of the year, the ministry figures showed.

The government has targeted a budget deficit of 80.6 billion liras for 2019 under an economic programme announced late last year.

Turkey’s central bank held about 46 billion liras of the special reserves, which it keeps for emergency purposes, before the government drawdown. “Other income” in January, which included the previous central bank transfers, totalled 41.3 billion liras.

Turkish Treasury and Finance Minister Berat Albayrak, the son-in-law of President Recep Tayyip Erdoğan, says the government is demonstrating budget discipline.

The government told bankers in July that it will miss its budget goal for the year and borrow more in the form of Treasury bonds, Bloomberg reported last month.

Erdoğan replaced the governor of the central bank last month and replaced him with a more government-friendly figure. Erdoğan says he expects the bank to extend a programme of interest rate cuts – it reduced the benchmark lending rate by 425 basis points to 19.75 percent after the sacking – to help spur economic growth.