Ankara opts for spending freeze
ANKARA – Turkey expects to make savings of 2.5 billion lira ($1.9 billion) in the fourth quarter through a freeze on some investment spending in the budget, economy officials told Reuters yesterday. They said the spending freeze would affect major bodies such as the education, health and justice ministries and water and road works, but not state companies and social security institutions. The officials said the spending freeze was important to reach the country’s budget targets before the next review of its multi-billion dollar loan programme with the International Monetary Fund (IMF). The Justice and Development Party (AKP) government, which returned to power after a strong general election victory on July 22, has presided over a period of robust economic growth and falling inflation under a program of tight fiscal discipline under the Fund deal. However, analysts said there was an easing of that discipline ahead of the election. «The freeze imposed on spending in the last quarter of the year will result in savings of around 2.5 billion lira,» one senior economy official told Reuters. At the start of August, the Finance Ministry nearly halved its forecast for the 2007 budget deficit due to high non-tax revenues including privatization proceeds. A ministry report revised the deficit forecast to 8.527 billion lira from 16.83 billion lira ($12.77 billion). The revised figure corresponds to 1.3 percent of gross national product (GNP). «The freeze is an important step in terms of maintaining the balances. The primary surplus diverged (from the target) due to some developments during the year,» said another economy official. Important to IMF review The forecast for the country’s central government budget primary surplus has been raised to 6.8 percent of GNP from 5.7 percent. The primary surplus, which does not include interest payments on government debt, is a key measure under the IMF programme. The official said the July 22 election had increased public spending and had started to harm fiscal discipline, making it necessary to take measures. «It was necesary to do this in order to complete the (IMF) review,» said a third economy official. An IMF delegation is expected to visit Turkey before the 2008 budget is presented to parliament on October 17. It held the last review in March and approved a letter of intent in May.
