Turkey Swings to Budget Deficit After Central Bank Cash Runs Out

(Bloomberg) -- Turkey posted a budget deficit in September after running a surplus for two months following injections of cash from the central bank.

The central government’s deficit was 17.7 billion liras ($3 billion) last month, compared with a shortfall of 6 billion liras in the same period a year earlier. Spending rose by over 20% while government revenues showed a subdued growth.

Key Insights

• Spending excluding interest payments rose by just under 7% on an annual basis to 68.7 billion liras, showing that much of the increase in public outlays is due to a rise in the cost of servicing debt.
• In the meantime, revenue growth remains subdued as the economy is only starting to gain momentum after exiting a technical recession in the first quarter.
• Public revenue rose around 3% from a year earlier, indicating a drop when adjusted for consumer inflation of 9.7%.
• The swing to a deficit shows the government was posting a surplus for the previous two months mainly on the back of cash injections from the central bank, which transferred to the Treasury some of its so-called cash reserve funds.

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• The Treasury posted a cash budget deficit of 21.7 billion liras in September.
• The ratio of the central government budget deficit to gross domestic product is seen at 2.9% in 2019, up from a previous forecast of 1.8%; the gap is projected at 2.9% in 2020 and 2021, and 2.6% in 2022, according to the government’s so-called medium-term program.

To contact the reporter on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, ;Onur Ant at oant@bloomberg.net, Paul Abelsky

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