Turkey’s 2004 draft budget sets deficit at 11 percent of GNP

ANKARA – Turkish Finance Minister Kemal Unakitan yesterday unveiled a 2004 budget designed to maintain financial discipline and meet International Monetary Fund (IMF) targets. Analysts welcomed the draft which they said appeared to be in line with IMF conditions under a $16 billion pact, reining in spending and bolstering revenues. The draft showed a gross national product (GNP) growth target of 5 percent for 2004, the same as this year’s target and an inflation target of 12 percent for the end of next year. The draft budget, presented to Parliament on Friday, envisages a deficit of 46,399 trillion lira ($31.72 billion) in 2004 – amounting to 11 percent of GNP – compared with a deficit of 40,759 trillion expected this year. «We have dispelled all doubts in national and international markets by not giving ground on our targets and by behaving decisively in applying measures,» Unakitan told a news conference held to announce the budget details. «Our success in reaching the targets for 2003 does not mean we are in a rose garden and everything is sorted out… Our fundamental priority in 2004 will be financial discipline,» he added. Turkey must comply with tight budget targets as it seeks to stem investor fears over an expensive domestic debt load of some $130 billion, swollen in recent years by financial crises. Unakitan said Turkey anticipates a consolidated budget primary surplus, which excludes payments on an onerous debt load, of 20,990 trillion lira in 2004, compared with a primary surplus of 17,990 trillion lira targeted for this year. Turkey is aiming for a primary surplus of 6.5 percent of gross national product by the end of 2003. This figure includes areas of the public sector that are not included in the consolidated budget. Unakitan said interest payments in 2003 would be 6,350 trillion lira less than targeted. «I think it (the budget) is a very strong public statement. Clearly the key issue is whether or not it will be compatible with IMF targets. It appears to be so,» said Mehmet Simsek, emerging markets analyst and strategist at Merrill Lynch in London. The draft budget showed that net budget revenues in 2004 were targeted to total 103,309 trillion lira, of which 99,173 trillion lira consisted of tax revenues. Before tax rebates for exporters, total revenues amounted to 113,739 trillion lira. A Finance Ministry official said yesterday Turkey planned a supplementary budget worth around 5,000 trillion lira ($3.42 billion) for this year because of social security transfers and the value-added tax refunds. The official said that Parliament was expected to pass the additional budget law at the start of November, adding that no additional financing was necessary to cover this budget. Budget expenditure in 2004 was expected to total 149,708 trillion lira ($103.4 billion), the draft said. The draft also showed Turkey was targeting a 2004 gross national product of 419,692 trillion lira ($289.9 billion). Separately, Unakitan said that budget expenditure in the first nine months amounted to 101,576 trillion lira and income totaled 71,751 trillion lira.