ECONOMY

Turkey’s ’03 primary surplus beats target despite tax revenue shortfall

ANKARA – Turkey accomplished a key target in its $19 billion loan accord with the IMF in 2003, achieving a primary surplus of 5.03 percent of gross national product, Finance Minister Kemal Unakitan said yesterday. However, he said tax revenues were lower than forecast. The budget’s primary surplus, which excludes interest payments, amounted to 17,950 trillion Turkish lira ($13.57 billion) in 2003, compared with a target of 17,852 trillion. The government had targeted a surplus of 5.00 percent of GNP. Last week, presenting preliminary figures, Unakitan said the surplus, seen as a basic indicator of Turkey’s ability to pay down its huge debt load, amounted to 4.91 percent. At a news conference to unveil the budget data, Unakitan said Turkey’s budget deficit fell to 11.2 percent of GNP last year from 14.7 percent in 2002 as the economy recovered from a 2001 financial crisis. He said a sharp fall in interest rates in the last year illustrated the value of sticking to the primary surplus target. Bond yields have fallen to around 25 percent from nearly 70 percent in March 2003 ahead of the war in neighboring Iraq. «We have constantly focused on the primary surplus and interest rates have fallen so rapidly. Otherwise, there would have been very high interest rates and we could not have emerged from the crises,» Unakitan said. The fall in rates was illustrated by bond auctions yesterday when the Treasury sold August 2004 paper at a maximum yield of 25.9 percent and March 2005 paper at a yield of 23.94 percent, in line with forecasts. Release of the budget data followed news last week that Turkey had agreed with a visiting IMF team on plans to cut budget spending this year to meet the cost of inflation-busting minimum wage and pension raises. Tax revenues short Unakitan said the 2003 budget deficit was 39,992 trillion lira ($30.34 billion), below a target of 40,800 trillion. The figures also differed from preliminary data given last week. Budget revenues amounted to 100,062 trillion lira and spending totaled 140,054 trillion. He said tax revenues in 2003 were 84,334 trillion lira, falling short of a target of 86,800 trillion, which he put down to the fall in inflation and the strength of the lira. «The absence of a rise in energy prices, particularly oil products, influenced our performance, especially in the second half. That led to lower revenues from the special consumption tax and value-added tax,» Unakitan said. Interest payments in 2003 totaled 58,609 trillion lira, while social security transfers were 15,922 trillion and agricultural support payments amounted to 2,805 trillion. The interest payments were equivalent to 16.4 percent of GNP last year, compared with 18.9 percent in 2002. Turkey’s public sector primary surplus, which includes funds that are not included in the budget, is also a key measure of economic performance under the International Monetary Fund deal and is targeted to reach 6.5 percent of GNP. This figure is expected to be released in mid-February.