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recent months and why it has borrowed at a record level while its deficit sharply contracted in May is an open question.
No one can get a look at the Treasury’s accounting books but the borrowing is done through the market.
Turkey on June 15 ​posted​ a central government budget deficit of Turkish lira 17.3bn ($2.53bn) in May.
Data from the finance ministry also showed the primary balance, which excludes interest payments, recorded with a deficit of TRY7.64bn.
The budget deficit stood at TRY90.1bn in the first five months of the year.
Last September, the government forecast a budget deficit of TRY138.9bn for 2020.
6.1.1 ​Budget dynamics - specific issues
“The debt-to-GDP ratio will continue to rise... We warned a couple of years ago that Turkey’s public finances would become a growing source of concern for investors and developments since then have only reinforced our view. Indeed, while President [Recep Tayyip] Erdogan’s government preached fiscal prudence in the New Economy Programme announced after the currency crisis in 2018, this has not materialised in practice,” Jason Tuvey, senior emerging markets economist at the economic research firm said in a June 5 note.
“Admittedly, the headline budget figures show that the primary deficit (that is, excluding interest payments) is still relatively small at 0.6% of GDP. But this is flattered by ​the government’s tapping of the central bank’s profits ​which the Treasury records as a revenue​, whereas ​the international convention is to register this as a form of budget financing​,” he added.
Financial repression​. There were “already signs that they might resort to financial repression in order to keep a lid on borrowing costs”, Tuvey said.
Based on IMF definitions, Turkey’s primary deficit reached 3.3% of GDP in the 12 months to April, compared with a surplus of around 0.5% of GDP in 2015. The deterioration in the budget position is partly attributable to the effects of the recession that followed the August 2018 lira crisis as tax revenues declined and welfare spending increased. The coronavirus (COVID-19) crisis will put further pressure on the public finances.
41​ TURKEY Country Report​ July 2020 ​ ​www.intellinews.com