Turkish budget is eaten up by interest payments on debts

ANKARA – Turkey has marginally exceeded an IMF-backed primary budget surplus target for the first four months of the year, but interest payments on its massive debts are swamping tax revenues, data released yesterday showed. The primary surplus, which stood at 6,753 trillion lira (some $4.5 billion) against a 6,600-trillion-lira target, is a key indicator of Turkey’s ability to pay down a massive debt load that weighs heavily on its budget. Low non-interest expenditure showed Ankara’s commitment to spending cuts under a $16 billion IMF pact, but lower-than-expected revenues, particularly tax receipts, meant it was barely on track to meet 2003 budget targets, analysts said. «The bottom line is that the government is on target on the budget, but only just. It has no room for error in this budget,» said Tolga Ediz at Lehman Brothers in London. Turkey has targeted a primary budget surplus of 20,283 trillion lira for the whole of 2003. Debt weighs Interest payments on debt of 23,184 trillion lira for the January-April period represented 103.5 percent of the 22,390 trillion lira the government collected in tax, the data showed. High real interest rates on Turkey’s domestic debt, the difference between bond yields and future inflation, mean potential big profits for investors but a constant struggle for the government to control spending. Revenues for the consolidated budget totaled 27,602 trillion lira for the first four months of the year, 27.4 percent of a year-end target of 100,782 trillion lira. «I wouldn’t be surprised if we get additional measures in a supplementary budget later in the year… Overall tax revenues are below target and they’ve made less than a third on the revenue side,» Ediz said. Total expenditure was 44,033 trillion lira against a target of 145,949 for the end of 2003, helped by below-target non-interest expenditure. Turkey hopes to close any gaps in the budget through a recently held tax amnesty, which restructures payments on tax arrears. But many analysts and the IMF worry the amnesty could make tax more difficult to collect in the future. Turkish Finance Minister Kemal Unakitan told reporters that applications for the tax amnesty totaled 7,900 trillion lira, 6,500 trillion lira of which came from the private sector. He said the government had collected some 908 trillion lira from the plan during April.