Download 6. Public Finance

Central Bank of the Republic of Turkey
6. Public Finance
In the first half of 2013, the budget performance displayed a year-on-year
improvement amid the adoption of tax rate hikes in September 2012 and
January 2013 as well as payments by BOTAŞ on overdue liabilities and
remarkable increases in consumption-based tax revenues owing to the
relatively robust economic activity. The periodical decline in interest payments
and the revenue obtained from the secondary public offering of Halkbank also
contributed to the positive budget performance during this period. In the
second half of the year, soaring indirect tax revenues on the expected
improvement in domestic
demand may positively affect
the
budget
performance. Nevertheless, strengthening the fiscal framework by institutional
and structural improvements envisaged in the MTP remains to be of utmost
importance regarding the sustainability of the positive course of fiscal balances
and for maintaining fiscal discipline on a permanent basis.
6.1. Budget Developments
In the first half of 2013, the central government budget and the primary
balance posted a surplus of TL 3.1 billion and TL 26.4 billion, respectively
(Table 6.1.1). Thus, the budget balance displayed a year-on-year improvement
and registered a surplus in this period. Despite the surge in primary expenditures,
the acceleration of the growth in consumption-based tax revenues and the
periodical decline in interest expenditures were instrumental in the improvement
in the budget performance.
Table 6.1.1.
Central Government Budget Aggregates
(Billion TL)
Central Government Budget Expenditures
Interest Expenditures
Primary Expenditures
Central Government Budget Revenues
I. Tax Revenues
II. Non-tax Revenues
Budget Balance
Primary Balance
January-June
2012
January-June
2013
Rate of Increase
(Percent)
Actual/Target
(Percent)
168.9
26.3
142.6
162.2
131.2
24.9
-6.7
19.6
187.9
23.3
164.6
190.9
158.4
26.2
3.1
26.4
11.2
-11.3
15.4
17.7
20.7
4.9
34.8
46.5
44.0
46.9
51.6
49.8
60.6
138.4
Source: Ministry of Finance.
The central government budget deficit to GDP, which went up in 2012 on
the slowdown in tax revenues and the acceleration in primary expenditures, is
expected to go down to 1.3 percent in the second half of 2013 (Chart 6.1.1).
Having declined to as low as 1.1 percent in the third quarter of 2012, the primary
Inflation Report 2013-III
113
Central Bank of the Republic of Turkey
budget surplus to GDP has started to increase. Accordingly, the primary budget
surplus to GDP ratio is estimated to reach 1.8 percent in the second quarter of
2013.
Chart 6.1.1.
Chart 6.1.2.
Central Government Budget Balance
Central Government Budget Revenues and
Primary Expenditures
(Annualized, Percent of GDP)
(Annualized, Percent of GDP)
Budget Balance
Primary Balance
Budget Revenues
Primary Expenditures
7
7
26
5
5
24
24
3
3
22
22
1
1
20
20
-1
-1
-3
-3
18
18
-5
-5
16
16
-7
14
-7
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2*
2007
2008
2009
2010
2011
2012 2013
26
14
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2*
2007
2008
2009
2010
2011
2012 2013
* Estimate.
Source: Ministry of Finance.
Having surged due to the adoption of fiscal measures to contain the
adverse effects of the 2009 global crisis on the Turkish economy, the central
government primary expenditures to GDP ratio declined in the subsequent
years. However, as of the second half of 2012, the central government primary
expenditures to GDP ratio has accelerated notably, and reached 22.6 percent
in the second quarter of 2013. Meanwhile, on the back of the tax adjustments in
September 2012 and January 2013 as well as the relatively robust economic
activity, the central government budget revenues to GDP ratio reached a
recent high of 24.4 percent in the second quarter of 2013 (Chart 6.1.2).
Central government primary budget expenditures, which started to surge
as of the second half of 2012, increased further in the first half of 2013.
Accordingly, central government primary budget expenditures registered a
year-on-year increase by 15.4 percent in the first half of 2013 (Table 6.1.2).
114
Inflation Report 2013-III
Central Bank of the Republic of Turkey
Table 6.1.2.
Central Government Primary Expenditures (Billion TL)
Primary Expenditures
1. Personnel Expenditures
2. Government Premiums to SSI
3. Purchase of Goods and Services
4. Current Transfers
a) Duty Losses
b) Health, Pension and Social Benefits
c) Agricultural Support
d) Shares Reserved from Revenues
5. Capital Expenditures
6. Capital Transfers
7. Lending
January-June
2012
142.6
43.8
7.3
12.3
66.7
0.9
34.4
6.3
16.7
7.2
1.1
4.1
January-June
2013
164.6
49.0
8.1
13.3
75.3
1.4
36.5
6.8
19.6
12.0
2.2
4.7
Rate of
Increase
(Percent)
15.4
11.7
10.3
8.0
13.0
64.1
6.3
8.0
17.3
65.8
99.6
13.0
Actual/Target
(Percent)
46.9
50.4
48.1
39.9
49.8
31.7
50.1
75.3
48.1
35.8
43.2
42.2
Source: Ministry of Finance.
In the first half of 2013, current transfers, personnel expenditures and
purchase of goods and services, one of the major items in primary expenditures,
registered a year-on-year increase by 13 percent, 11.7 percent and 8 percent,
respectively. Expenditures on health, pension and social benefits registered a
relatively slow growth, while shares reserved from revenues contributed to the
increase in current transfers.
As for other expenditure items, the surge in capital expenditures and
capital transfers are noteworthy in the first half of 2013. Road construction
expenditures played a major role in the 65.8 percent increase in capital
expenditures.
In the first half of 2013, central government general budget revenues
recorded a year-on-year increase by 18.2 percent (Table 6.1.3). During the
same period, tax revenues and non-tax revenues increased by 20.7 percent
and 4.9 percent, respectively.
Table 6.1.3.
Central Government General Budget Revenues
(Billion TL)
General Budget Revenues
I-Tax Revenues
Income Tax
Corporate Tax
Domestic VAT
SCT
VAT on Imports
II-Non-Tax Revenues
Enterprises and Property Revenues
Interests, Shares and Fines
Capital Revenues
January-June
2012
January-June
2013
Rate of Increase
(Percent)
Actual/Target
(Percent)
156. 1
184. 5
18. 2
51. 1
131. 2
26. 8
14. 4
15. 4
31. 3
23. 3
24. 9
10. 9
10. 2
1. 4
158. 4
29. 5
15. 4
19. 0
40. 0
30. 9
26. 2
7. 5
12. 2
5. 4
20. 7
10. 1
7. 0
23. 8
27. 6
32. 3
4. 9
-31. 5
19. 1
286. 9
49. 8
47. 1
52. 6
52. 3
48. 1
50. 5
60. 6
81. 7
54. 3
58. 0
Source: Ministry of Finance.
Inflation Report 2013-III
115
Central Bank of the Republic of Turkey
Tax revenues displayed a positive performance on stronger domestic
demand, the adoption of revenue-increasing measures in September 2012 and
January 2013 and regular payments by BOTAŞ on overdue liabilities. In
particular, consumption-based indirect tax revenues soared in the first half of
2013. During this period, SCT revenues surged by 27.6 percent on account of the
increases in tax revenues on oil and natural gas products, motor vehicles and
alcoholic beverages. In the first half of 2013, domestic VAT revenues posted an
increase by 23.8 percent, while VAT revenues picked up after the slowdown in
2012 and went up by 32.3 percent on BOTAŞ payments.
In the first half of 2013, non-tax revenues displayed a limited increase. By
sub-items, capital revenues registered a notable hike, while enterprises and
property revenues plunged. The hike in capital revenues is mainly due to the
transfer of the privatization revenue on the secondary public offering of
Halkbank to the Treasury in January. The plunge in enterprises and property
revenues, on the other hand, is attributed to the declining amount of the
transfer of the CBRT’s profit to the budget.
Having slowed down in the first three quarters of 2012 due to weak
domestic demand, real tax revenues soared in the last quarter on tax
adjustments as well as base effect. As of the first quarter of 2013, real tax
revenues increased further amid the relatively robust domestic demand and
the adoption of revenue-increasing measures in January 2013 (Chart 6.1.3).
Chart 6.1.3.
Chart 6.1.4.
Real Tax Revenues
Real VAT and SCT Revenues
(Annual Percent Change)
(Annual Percent Change)
25
25
60
20
20
50
Real Domestic VAT Revenues
Real SCT Revenues
Real VAT Revenues on Imports
60
50
40
40
30
30
15
15
10
10
20
20
5
5
10
10
0
0
0
0
-10
-10
-20
-20
-30
-5
-5
-10
-10
-30
-15
-15
-40
12341234123412341234123412
2007
2008
2009
2010
2011
2012 2013
-40
12341234123412341234123412
2007
2008
2009
2010
2011
2012 2013
Source: Ministry of Finance.
Consumption-based tax revenues are the major tax revenue items to
have been adversely affected from the balancing of domestic and external
demand in 2012. While the tax revenue items exhibited a particularly negative
116
Inflation Report 2013-III
Central Bank of the Republic of Turkey
performance in the first three quarters of 2012, consumption-based tax revenues
displayed a remarkable increase in the last quarter due to favorable base
effect and adoption of tax measures. Consumption-based tax revenues
accelerated further in 2013. Accordingly, in the second quarter of 2013,
domestic VAT revenues registered a year-on-year increase by 22.4 percent,
while VAT revenues on imports and SCT revenues went up by 20.5 percent and
17.7 percent, respectively in real terms (Chart 6.1.4).
6.2. Developments in the Public Debt Stock
Public debt stock indicators improved further in June 2013. The ratio of
total public net debt stock and EU-defined general government nominal debt
stock to GDP continued to decline; the real cost of borrowing stood low and
the average maturity of the debt stock extended further.
As of June 2013, central government debt stock displayed a slight yearon-year increase and reached TL 552 billion (Chart 6.2.1). Compared to end2013, the ratio of total public net debt stock and EU-defined general
government nominal debt stock to GDP went down by 1.3 and 0.4 percentage
points to 15.7 and 35.7 percent, respectively, in the first quarter of 2013
(Chart 6.2.1).
Chart 6.2.1.
Chart 6.2.2.
Public Debt Stock Indicators
Composition of the Central Government Debt Stock
(Percent)
552.1
70
600
500
100
27.3
80
FX-Denominated/FX-Indexed **
Floating-Rate ***
Fixed-Rate
80
28.3
Total Public Net Debt Stock *
(Percent of GDP)
EU-Defined Central Government Nominal Debt Stock *
(Percent of GDP)
Central Government Total Debt Stock
(Billion TL, right axis)
34.7
60
34.0
35,7
40
37.9
400
50
37.7
60
300
40
15.7
30
20
200
100
10
0
0
2003
2005
2007
2009
2011
2013/3
20
0
2001
2003
2005
2007
2009
2011
2013/6
* As of the first quarter of 2013 for debt stock to GDP ratios.
** FX-Denominated/FX-Indexed debt stock includes external debt stock and FX-denominated and FX-indexed domestic debt stock.
*** Floating-Rate debt stock includes discounted securities with a maturity less than 1 year and GDBS with floating rates.
Source: Treasury.
As of the first half of 2013, the Treasury continued with its borrowing
strategy to alleviate the sensitivity of the debt stock to liquidity, interest and
exchange rate. Accordingly, the share of fixed-rate securities in the total debt
Inflation Report 2013-III
117
Central Bank of the Republic of Turkey
stock remained unchanged from 2012 (Chart 6.2.2). The ratio of public deposits
to average monthly debt service stands at 217.2 percent. The average maturity
of the domestic cash borrowing displayed a remarkable year-on-year increase
in 2013, thereby raising the average term-to-maturity of the domestic debt stock
to 40.7 months (Chart 6.2.3). External borrowing by bond issues amounted to
USD 3.2 billion, with the average maturity hitting 20.1 years (Chart 6.2.4).
Chart 6.2.3.
Chart 6.2.4.
Average Maturity of the Domestic Cash Borrowing
and Term-to-Maturity of the Domestic Debt Stock
Borrowing By Bond Issue
(Month)
External Borrowing (billion USD, right axis)*
Average Maturity of External Borrowing (year)
Maximum Maturity of External Borrowing (year)
Average Maturity of Domestic Debt Stock
Average Maturity of Domestic Cash Borrowing
71.8
75
60
75
35
8
30
7
60
6
25
40.7
45
5
45
20
30
15
4
30
3
10
2
15
201…
2012
2011
2010
2009
2008
2007
2006
2005
2004
0
2003
1
0
2001
2012
2013/6
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
2000
0
5
2002
15
* Denotes total external borrowing for the relevant year.
Source: Treasury.
Source: Treasury.
Domestic debt rollover ratio stood at 87.3 percent as of end-May 2013
(Chart 6.2.5). The average real interest rate at discount auctions, which
slumped from early 2009 to early 2011, continues to remain low (Chart 6.2.6).
Chart 6.2.5.
Chart 6.2.6.
Total Domestic Debt Rollover Ratio
Average Maturity of the Borrowing and Interest
Rates at Discount Auctions
(Percent)
110
110
700
Maturity (day)
Average Compounded Interest Rate (right axis)
Real Interest Rate (right axis)
600
100
100
30
25
500
20
400
87.3
90
90
15
300
89.3
81.4
70
80
70
2003
2005
2007
2009
2011
2013/5
100
5
0
0
1203
0604
1204
0605
1205
0606
1206
0607
1207
0608
1208
0609
1209
0610
1210
0611
1211
0612
1212
0613
80
10
200
84.5
Source: Treasury, CBRT.
118
Inflation Report 2013-III