ANKARA – Turkey has reinforced its commitment to pursuing tough economic policies under its IMF-led recovery plan by setting ambitious targets in its 2006 draft budget and shifting to three-year budgeting methods. The EU candidate will stick with a key primary budget surplus target of 6.5 percent in 2006 and lower its budget deficit to 2.5 percent of the gross national product (GNP), Finance Minister Kemal Unakitan said yesterday. The primary surplus and budget deficit projections for 2005 were at 6.5 percent and 6.1 percent respectively. The draft budget marked another step toward entrenching the financial stability which has brought chronically high inflation down to single digits amid strong economic growth since a 2001 financial crisis – a recovery crowned by the start of EU entry talks on Oct. 3. A key pledge to the International Monetary Fund, Ankara has set an annual target of 6.5 percent of GNP for its overall public sector primary surplus since 2003. A measure of the government’s confidence and the economy’s growing predictability was yesterday’s introduction of a three-year budgeting method for 2006-2008. «This (new budget method) means that stability and confidence have been restored and established fully,» Prime Minister Recep Tayyip Erdogan said separately. «Now we are in a position to plan the next three years,» he told the ruling party’s deputies in Parliament. The government submitted the draft budget to Parliament on Monday night, and introduced «central administration» and «general» budgets. The draft budget for 2006 envisages a deficit of 13.3 billion lira ($9.77 billion), well below the target in the 2005 budget of 29.137 billion, economic officials told Reuters. They also said the primary surplus, which the International Monetary Fund follows closely, was seen at 27.5 billion lira in 2006, little changed from the target in the 2005 budget of a surplus of 27.303 billion lira. The budget deficit is derived from the difference between government spending and revenue, while the budget’s primary surplus excludes interest payments on the country’s debt stock. «The primary surplus target at 6.5 percent had been expected, and the government is likely to achieve it,» said Anadolubank senior dealer Cengiz Kilic. «If we have no problems on privatization, then we see no difficulties with 2006 budget targets,» said Kilic. Turkey’s stumbling privatization plans took two major steps forward recently with successful tenders for controlling stakes in landline operator Turk Telekom and oil refiner Tupras, but both still face legal challenges. Lower interest payments Unakitan said the ratio of interest payments to GNP would fall to 8.6 percent in 2006, compared with a previously announced 11.7 percent target in 2005’s consolidated budget. The minister also said that the ratio of budget revenues for GNP would rise to 26.7 percent in 2006, and the ratio of budget expenditures to GNP would fall to 29.1 percent. GNP is the total value of all goods and services produced by a country plus net income earned by investments or by remittances from abroad. One potential threat to the government’s targets is the widening of the country’s current account deficit, fueled by a growing trade gap. Ankara will also be wary of high oil prices as it seeks to keep its recovery on track.