Page 37 - TURKRptJul19

6.1.1 Budget dynamics - specific issues
Turkey reviving plans to transfer central bank legal reserves to help fix deteriorating budget. Turkey's government is reportedly reviving plans to transfer the central bank's Turkish lira (TRY) 46bn ($8bn) in legal reserves to its deteriorating budget to shore it up and is also mulling adjusting some tax measures as it battles the prospect of a double-dip recession. A Treasury official and three other sources familiar with the plans confirmed to Reuters that the funds—which are separate from the central bank's foreign exchange reserves—were being assessed for use in a bid to help narrow a budget deficit that has widened by 225% in the first five months of the year. Turkey is usually commended for its fiscal metrics but the economic turmoil sparked by last year’s currency crisis has somewhat changed the picture. Observers would paint such a transfer from the central bank as the latest unorthodox attempt by President Recep Tayyip Erdogan's administration to pull Turkey away from recession and steady the lira. Reuters reported in May that the Treasury was working on a plan to transfer some TRY40bn of the legal reserves, but the scheme was shelved after word of it caused a market backlash. Analysts say the measure would weaken the national lender’s ability to respond to another currency crisis. The "legal reserves" are what the central bank sets aside from profits by law to be used in extraordinary circumstances. "The planned regulation amendment for legal reserves was not completely dropped. It was on hold during that time," one of the officials with knowledge of the matter was cited as saying. "There is a will that it would be included into a proposed legislation."
Turkey's budget recorded a TRY66.5bn deficit in the first five months of this year. That was the case even though the central bank transferred some TRY37bn lira in profits in January. The government forecasts an 80.6bn lira deficit this year, or a 1.8% ratio versus Turkey's GDP. Economists generally expect the ratio to be more than 3%, though the addition of the legal reserves would lower that by about one percentage point. "This is the money for difficult times. It should not be used to continue faulty policies...This is clearly wrong. Turn back from this mistake," Ozgur Demirtas, the finance desk chairman at Sabanci University, was quoted as saying.
6.1.2 Budget dynamics - tax issues
6.1.3 Budget dynamics - privatization
It is raining price and tax hikes in Turkey since the end of the June 23 Istanbul revote.
Turkey’s Wealth Fund reportedly hires EY for lottery privatisation. Turkey’s Wealth Fund (TVF) has hired consultancy Ernst & Young to advise on the privatisation of the country’s national lottery, Milli Piyango, Bloomberg HT reported on July 1. In May, Zafer Sonmez, the head of TVF, said bids for the operating rights of Milli Piyango would be received in June and the process would be completed by the end of the year. A previous auction for Milli Piyango was held in 2014, when a consortium of Net Holding’s Net Sans and Hitay placed the highest bid of $2.76bn for a licence to operate the lottery for 10 years. However, the consortium failed to sign the final agreement by the deadline and the privatisation administration invited the second-best bidder - ERG-Ahlatci - to sign the concession agreement. ERG-Ahlatci, which offered to pay $2.75bn for the licence, did not make the payment by the December 2015 deadline and the tender was subsequently cancelled. TVF, worth $50bn, was set up in 2016 to develop and increase the value of Turkey’s strategic assets. TVF has stakes in major Turkish companies including flag carrier Turkish Airlines, big banks and Turk Telekom.
37 TURKEY Country Report July 2019 www.intellinews.com