Budget deficit widens six-fold to 3 billion liras

Bloomberg

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The deficit in January was 3 billion Turkish Liras ($1.8 billion), or 29 percent of the year-end goal, compared with 524 million liras a year earlier, the ministry in Ankara said in an e-mailed statement. The budget produced a surplus, excluding interest payments on debt, of 816 million liras, narrower than the 3.8 billion liras reported for January 2008.

The budget was drafted on the assumption of 4 percent economic growth this year while the International Monetary Fund, or IMF, forecasts a 1.5 percent contraction. Turkey and the fund failed to agree on a possible loan accord last month and promised to continue talks on changes to the budget.

"The budget simply is not realistic and if spending carries on at this rate and revenue continues to decline then we’re going to see an extraordinary deficit," said Mehmet Besimoğlu, economist for Oyak Securities in Istanbul. "That’s why they can’t reach an agreement with the IMF."

Pre-election spending

Non-interest spending rose 25 percent from a year earlier to 15 billion liras in January. Almost half of that was in the form of current transfers, which jumped 40 percent to 7.2 billion. The transfers are made up of farm support payments and spending allocated to local municipalities, the ministry said.

The ruling Justice and Development Party, or AKP, is preparing for local elections on March 29.

While total budget spending in January grew 15 percent, income was almost unchanged from a year earlier and tax revenue fell 2.4 percent to 13.8 billion liras, the ministry said.

The global economic slowdown meant income from indirect taxes such as a levy on imported goods had fallen below target, it said.

Meanwhile, the current-account deficit narrowed in December for the fourth consecutive month as falling energy prices and slumping demand helped reduce the import bill.