Economic Policy Research Foundation of Turkey (TEPAV) warns in its recent report that there is no more room left for flexibility in 2024 budget.
In the report prepared by TEPAV Center for Fiscal and Monetary Policy Research, it was stated that the Treasury cash deficit, which was TRY 169 billion in 2022, increased 3.7 times to TRY 625 billion.
It is stated in the report that the Treasury cash balance will run a deficit of TRY 625 billion at the end of 2023 and the budget deficit will be TRY 659 billion, as it is close to the Treasury cash balance. This amount is far below the year-end forecasts made with the supplementary budget and the Medium Term Plan, which went up to TRY 1.6 trillion. The forecasts have deviated positively. On the other hand, the high amounts in the Treasury cash deficit are also noteworthy.
“Turkey has no spending flexibility in terms of budget and pointed out that the risk continues in 2024 in terms of budget balance” according to the report.”The expenditures were postponed to 2024 and the necessity of structural reforms to increase tax revenues increased budget rigidity while reducing the flexibility of the Treasury and causing it to carry very high cash balances. This, in turn, increases the interest burden of the budget. Having left behind a difficult year with elections, wars, earthquakes, and crises, 2024 seems to be another difficult year for the Treasury due to the upcoming local elections, regional and global political and economic risks.”
Net borrowing of TRY 823 billion
In the assessment note, it was reminded that while the supplementary budget was estimated at TRY 1.6 trillion for 2023 and the borrowing limit was raised to TRY 2.2 trillion, a net borrowing of TRY 823 billion was made, TRY 625 billion was used for deficit financing while TRY 198 billion was transferred to bank accounts. It was reminded that in July, TEPAV had previously assessed that the budget deficit might remain below the supplementary budget forecast at the end of the year due to controlled spending and additional revenues.
The reasons for the large deviation in the budget deficit forecast, are as follows according to the TEPAV report: “Transferring the budget burden of foreign currency protected accounts to the Central Bank after the election, the postponement of earthquake expenditures, additional motor vehicle tax and other tax regulations, rising tax revenues with inflation led to a better performance of the budget.”