ECONOMY

Turkish MPs pass budget cuts

ANKARA (Reuters) – Turkey’s Parliament yesterday approved a supplementary package of spending cuts worth 4,000 trillion lira ($3.0 billion), in line with an accord clinched with the International Monetary Fund (IMF). Turkey is trying to cover a 7,000-trillion-lira financing gap triggered largely by above-inflation minimum wage and pension rises. IMF officials are currently in Ankara reviewing Turkey’s $19 billion loan accord with the Fund. The government announced on Tuesday it would cut spending by 13 percent to cover the wage and pension hikes, more than an initially slated 10 percent. It has not detailed where all the cuts will fall, but some investments may be included. The rest of the financing gap will be covered by steps such as increases in value-added tax. The government wants to raise state pensions by 21 percent and the minimum wage by 34 percent by the end of the year, compared to a year-end inflation target of 12 percent. The IMF was worried the increases would undermine a year-end primary surplus target of 6.5 percent of gross national product (GNP). The primary surplus excludes interest payments on Turkey’s domestic debt stock of $150 billion.