Turkish budget burdened by debt payments, C/A deficit
ANKARA (Reuters) – Turkey announced the details of a 2003 budget yesterday that will require tight financial discipline from the new government in Ankara amid fears for the cost of a possible war in neighbor Iraq. The 2003 budget is expected to produce a current account deficit of $3.489 billion against a forecasted $1.808 billion for 2002, Finance Minister Kemal Unakitan told a parliamentary commission. The ruling Justice and Development Party handed the 2003 budget to Parliament earlier this week after months of haggling with the International Monetary Fund (IMF) over cost-cutting and revenue-raising measures the fund said were needed to ensure fiscal discipline. Unakitan forecast the consolidated budget’s primary surplus at 21,433 trillion lira ($13.26 billion), a figure he said was in line with a key IMF-backed target requiring tight spending limits. «Achieving the target all depends on how determined the government is in implementing financial measures,» said Yarkin Cebeci, an economist at JP Morgan in Istanbul. Turkey sees spending at 146,900 trillion lira in the 2003 consolidated budget, and a deficit of 46,100 trillion lira. The IMF welcomed the budget earlier this week, saying its aims were consistent with the primary surplus target of 6.5 percent of gross national product (GNP). The primary surplus excludes interest payments on Turkey’s massive debt load. The current account for the 2002 budget was $182 million in surplus in January to November. Analysts said the current account had likely dipped into deficit for 2002 as a whole, due in part to a sharp rise in imported goods during December. «There was a huge import wave in December… There should be a revision also in (current account) data for earlier months,» said Volkan Kurt at ABN Amro in Istanbul. The current account can be heavily influenced by a rise in imports, which are often driven by rising domestic demand. Higher consumer spending? Turkey is hoping for higher consumer spending during 2003 to help achieve a 5 percent GNP growth target under its $16 billion IMF pact. But Ankara also targets reducing consumer price inflation (CPI) to a yearly 20 percent and wholesale price inflation to 17.4 percent by the end of 2003. Sharp rises in domestic demand or government spending could compromise those targets. CPI edged up to an annual 27 percent in February. Turkey’s central bank has warned efforts to reduce CPI might also be hit by a possible conflict in Iraq, which may hike the price of imported oil and hit Turkey’s tourism and trade revenues hard. Turkey forecasts exports of $39.2 billion and imports of $54.7 billion in 2003. Unakitan said GNP was expected to total some 271,400 trillion lira (around $168 billion) in 2002 against a target of around 280,550 trillion lira. Turkey targets GNP to rise to 354,600 trillion lira in 2003. Parliament is expected to discuss the budget at commission level prior to its likely approval in the general assembly. The budget’s passage is linked to a latest $1.6 billion loan tranche from the IMF, which Turkey hopes will be released in late March or early April. Turkey’s lira and debt jumped yesterday and stocks firmed after the armed forces chief bolstered hopes Parliament would reconsider an urgent US request to station troops in the country, brokers said. Yields on busy December 3, 2003 debt firmed more than four percentage points to 57.75 percent. The lira rose to close at 1,596,000 to the dollar from Tuesday’s 1,620,000. The main stock index rose 1.88 percent to 10,815.49 points after ending the first session down 0.74 percent. Markets had fallen heavily earlier in the week after the weekend rejection of the motion sanctioning the arrival of tens of thousands of US troops to Turkey. The government has yet to say if it will ask Parliament to vote again. Investors worry Parliament’s rejection of the motion might compromise Turkey’s ability to pay down a massive debt load if war breaks out.
