Turkey: Budget posts a deficit in June with increased spending

According to the June budget data announced by the Ministry of Treasury and Finance; The central government budget, which had a surplus of 144 billion TRY in May 2022, triggered by the increase in tax revenues, had a monthly fiscal deficit of 31.1 billion lira (1.8 billion dollars) in June 2022. The budget had a deficit of 25 billion TRY in the same period of last year.

As stated in the Monthly Budget Realizations Report, the primary deficit, which was TRY 15.6 billion in June 2021, became TRY 18.3 billion in June 2022. In this period, while the annual increase in total interest incomes was 35.6%, revenues increased by 104.9% to 181 billion liras and the contribution of tax revenues to 152.6 billion liras. Looking at the sub-items of tax revenues; While the SCT increased by 113.5%, the VAT increase remains below the inflation rate with 49.8%.

Expenditures increased by 87.1% in June compared to the same month of the previous year and reached 212.1 billion liras. In the same period, expenditure on wages increased by 58.6%, below inflation, and reached 42.5 billion liras; Current transfers, including aid to households, more than doubled and reached 106.8 billion liras. Considering its sub-items, it is noteworthy that there was a 216% increase in transfers to local administrations. Thus, the rate of increase in primary budget expenditures was 91.7%. Another noteworthy item in the increase in expenditures is the item of capital expenditures, which increased by 181%. FX-linked deposit expenses were realized as 16.1 billion TRY in June. In this item, the total expenditure on FX-linked deposit increased to 37.2 billion liras in 2022.

When we look at the 2022 cumulative data; January-June budget surplus was 93.6 billion liras. While there was a primary surplus of 58.3 billion TRY in January – June 2022, a primary surplus of 228.2 billion TRY was realized this year. Budget revenues increased by 100.6% between January – June 2021 and January – June 2022 to 1 trillion 265.4 billion TRY, while budget expenditures increased by 76.7% to 1 trillion 171.9 billion TRY in the same period. In the same period, the increase in tax revenues was realized as 108% and became 1 trillion 33.8 billion TRY. In the same period, the increase in corporate tax was 278.2%, while income tax revenues were 48.1%. Non-interest budget expenditures, on the other hand, increased by 81.2% and amounted to 1 trillion 37.2 billion TRY.

The Treasury ran a cash budget deficit of 26.6 billion lira in June. The central government budget ran a deficit in June as expenditures on current transfers and personnel wages increased. While strong support was given to the income side of the budget together with the taxes taken from international trade and SCT, we think that the slowdown in foreign demand and the possible decrease in consumption in the second half of the year will limit the positive impact of the relevant income items. On the other hand, we will continue to directly monitor the exchange rate and interest effects due to FX-linked deposit on the budget expenditures side. With the effect of the periodic increase in the exchange rates, the difference to be covered by the Treasury budget expenditures approached the 50 billion TRY band as of the dollar exchange rate, which was 17.50 in July. If companies and individuals continue to enter the FX-linked deposit system in maturity cycles and the increase in the exchange rate continues together, the budget burden of FX-linked deposit will take up more space towards the end of the year.

Kaynak: Tera Yatırım
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