Download 6. Public Finance

Central Bank of the Republic of Turkey
6. Public Finance
The budget performance displayed a year-on-year deterioration in 2012
on the account of soaring personnel expenditures, which have a major share in
primary expenditures as well as increases in health, pension and social benefit
expenditures (Chart 6.1). In addition, marked deceleration of the rate of
increase in tax revenues due to changing composition of growth amid
balancing of the external and domestic demand was also influential on the
deterioration of the budget performance via revenues channel. EU-defined
nominal debt stock to GDP, which started to decline in 2010, decreased further
in 2012 (Chart 6.2).
Chart 6.1
Chart 6.2
Central Government Budget Deficit
EU-Defined Public Debt Stock
(Percent of GDP)
(Percent of GDP)
12
12
80
80
70
10
60
9
60
8
40
31.0
35.0
6
33.0
6
50
30
1.8
2.2
2.0
4
3
20
20
2
10
2015*
2014*
2012
2013*
2011
2010
2009
2008
2007
2006
2005
2004
2003
0
2002
0
2001
2015*
2014*
2012
2013*
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
0
2001
0
40
* MTP (2013-2015) Targets.
Source: Ministry of Finance, MTP (2013-2015.
Budget performance exhibited a year-on-year improvement in the first
quarter of 2013 on the back of tax measures adopted in September 2012 as
well as the remarkably higher consumption-based tax revenues amid revival in
the economic activity. The periodical decline in interest expenditures and
privatization revenues also favorably affected the budget performance. The
soaring of indirect tax revenues due to stronger domestic demand throughout
2013 will further contribute to the improvement of the budget performance.
However, it should be emphasized that strengthening the fiscal framework by
structural improvements envisaged in the MTP remains to be of utmost
importance with regard to maintaining fiscal discipline on a permanent basis in
the medium term.
Inflation Report 2013-II
115
Central Bank of the Republic of Turkey
6.1. Budget Developments
Central government budget posted a deficit of TL 0.9 billion during
January-March 2013, while primary balance registered a surplus of TL 14.3 billion
(Table 6.1.1). Budget balance displayed a notable year-on-year improvement
in this period. Despite the significant increase in primary expenditures, budget
performance improved mainly on the back of the surge in consumption-based
tax revenues, the periodical decline in interest expenditures and the soaring of
non-tax revenues amid higher privatization revenues.
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
JanuaryMarch
2012
JanuaryMarch
2013
Rate of Increase
(Percent)
Actual/Target
(Percent)
83.8
17.3
66.5
77.4
64.5
9.6
-6.4
10.9
95.0
15.1
79.9
94.1
77.4
13.4
-0.9
14.3
13.3
-12.6
20.1
21.6
20.0
40.2
-86.1
30.8
23.5
28.6
22.8
25.4
24.3
31.1
2.6
74.8
Source: Ministry of Finance.
The central government budget deficit to GDP, which soared in 2012 due
to deceleration of the tax revenues and the rising of primary expenditures, is
estimated to fall to 1.6 percent in the first quarter of 2013 (Chart 6.1.1). Having
declined to as low as 1.1 percent in the third quarter of 2012, primary budget
surplus to GDP has started to increase. Accordingly, it is estimated to have
reached 1.6 percent in the first 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
7
7
5
5
3
Primary Expenditures
24
24
1.6 3
22
22
1
1
20
20
-1
-1
18
18
16
16
-1.6
-3
-5
-3
-5
-7
-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*
2007
2008
2009
2010
2011
2012 2013
14
14
1234123 4123412 34123412 341
2007
2008
2009
2010
2011
2012 2013
* Estimate.
Source: Ministry of Finance.
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Inflation Report 2013-II
Central Bank of the Republic of Turkey
Having surged on account of the adopted fiscal measures to limit 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, central government primary expenditures to GDP ratio has
picked up starting from the second quarter 2012, reaching 22.6 percent in the
first quarter of 2013. Meanwhile, central government budget revenues to GDP is
estimated to hit the recent high of 24.1 percent in the first quarter of 2013 on the
back of the tax measures adopted in September 2012 and the relatively robust
economic activity (Chart 6.1.2).
Having edged up as of the second quarter of 2012, central government
primary budget expenditures increased further in the first quarter of 2013.
Accordingly, central government primary budget expenditures recorded a
year-on-year rise by 20.1 percent in January-March 2013 (Table 6.1.2).
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
JanuaryMarch
2012
66.5
21.6
3.7
4.7
32.3
0.4
16.2
2.6
9.0
1.7
0.2
2.2
JanuaryMarch
2013
79.9
25.1
4.2
5.4
37.9
0.7
18.9
2.8
10.2
4.1
0.4
2.7
Rate of
Increase
(Percent)
20.1
15.9
13.3
14.5
17.5
74.2
16.6
6.0
13.0
141.2
90.4
22.8
Actual/Target
(Percent)
22.8
25.8
25.2
16.1
25.1
16.0
25.9
30.8
25.0
12.3
7.6
24.5
Source: Ministry of Finance.
Current transfers and personnel expenditures, major items in primary
expenditures, registered a year-on-year increase by 17.5 percent and 15.9
percent, respectively in the quarter of 2013. Despite lagging behind the rate of
increase in current transfers, health, pension and social benefits, which account
more than half of current transfers, registered a marked increase of 16.6
percent.
As for other expenditure items, the surge in capital expenditures, which
was driven by road construction expenditures as well as capital transfers is
noteworthy in the first quarter of 2013.
Inflation Report 2013-II
117
Central Bank of the Republic of Turkey
The central government general budget revenues posted a year-on-year
increase by 22.6 percent in January-March 2013 (Table 6.1.3). During the same
period, tax revenues increased by 20 percent, while non-tax revenues
increased by 40.2 percent amid transfer of the raised revenues to Treasury in
January following the secondary public offering of Halkbank. Consumptionbased tax revenues soared notably in January-March 2013. More specifically,
on the back of increases in SCT collection on oil and natural gas products as
well as tobacco products, SCT revenues increased notably by 29.6 percent in
this period. Meanwhile, having slowed down in 2012, VAT revenues on imports
increased by 36.1 percent in January-March 2013 due to BOTAŞ payments.
Table 6.1.3.
Central Government General Budget Revenues
(Billion TL)
General Budget Revenues
JanuaryMarch
2012
JanuaryMarch
2013
Rate of Increase
(Percent)
Actual/Target
(Percent)
74.0
90.8
22.6
25.1
I-Tax Revenues
64.5
77.4
20.0
24.3
Income Tax
13.0
14.2
9.0
22.6
Corporate Tax
7.4
7.8
5.6
26.6
Domestic VAT
8.0
9.4
17.2
25.8
SCT
13.9
18.0
29.6
21.7
VAT on Imports
10.9
14.8
36.1
24.2
II-Non-Tax Revenues
9.6
13.4
40.2
31.1
Enterprises and Property Revenues
2.9
1.6
-45.6
17.1
Interests, Shares and Fines
4.8
6.4
33.3
28.4
Capital Revenues
0.6
5.0
695.8
53.8
Source: Ministry of Finance.
Amid balancing of the domestic and external demand in 2012 as well as
the base effect, the annual rate of increase in real tax revenues, which has
started to slow down as of the third quarter of 2011, hit negative values in the
second and third quarters of 2012 after a 10-quarter period. The annual rate of
increase in real tax revenues turned positive, and reached 11.9 percent in the
first quarter of 2013 due to adoption of tax rate hikes to certain products in
September 2012 as well as base effects (Chart 6.1.3). Consumption-based tax
revenues stood as the major tax revenue items to have been adversely
affected by the balancing of domestic and external demand in 2012.
Accordingly, consumption-based tax revenues exhibited a particularly negative
performance in the first three quarters of 2012. However, consumption-based
tax revenues increased remarkably in the last quarter of 2012 on the back of the
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Inflation Report 2013-II
Central Bank of the Republic of Turkey
favorable base effect as well as the adopted tax measures. In the first quarter
of 2013, consumption-based tax revenues accelerated further. Accordingly,
VAT revenues on imports increased by 26.9 percent, while SCT revenues and
domestic VAT revenues increased by 20.9 and 9.3 percent, respectively in real
terms (Chart 6.1.4).
Chart 6.1.3.
Chart 6.1.4.
Real Tax Revenues
Real VAT and SCT Revenues
(Annual Percent Change)
(Annual Percent Change)
25
25
20
20
11.9 15
15
Real Domestic VAT Revenues
Real SCT Revenues
Real VAT Revenues on Imports
60
60
50
50
40
40
30
30
20
20
10
10
5
5
10
10
0
0
0
0
-5
-5
-10
-10
-15
-15
1234123412341234123412341
2007
2008
2009
2010
2011
20122013
-10
-10
-20
-20
-30
-30
-40
-40
1234123412341234123412341
2007
2008
2009
2010
2011
20122013
Source: Ministry of Finance.
6.2. Developments in the Public Debt Stock
Public debt stock indicators improved further in March 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 was extended further.
As of end-2012, the ratio of total public net debt stock and EU-defined
general government nominal debt stock to GDP were reduced by 5.4 and 3.1
percentage points from the year-end and reached 17 and 36.1 percent,
respectively
(Chart 6.2.1). Meanwhile, as
of
end-March
2013, central
government debt stock remained unchanged from 2012 (Chart 6.2.1).
Inflation Report 2013-II
119
Central Bank of the Republic of Turkey
Chart 6.2.1.
Chart 6.2.2.
Public Debt Stock Indicators
Composition of the Central Government Debt Stock
(Percent)
537.2
Floating-Rate
Fixed-Rate
600
80
70
26.9
80
FX-Denominated/FX-Indexed
100
27.3
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)
17.0
30
300
20
200
34.7
36.1
40
60
35.7
400
50
37.9
60
37.4
500
40
20
100
10
0
0
2001
0
2003
2005
2007
2009
2011
2003
2005
2007
2009
2011
2013/3
2013/3
* 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 quarter of 2013, the Treasury continues to adhere to 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 stock remains unchanged from 2012 (Chart 6.2.2). The ratio of public
deposits to average monthly debt service stands at 155.7 percent. The average
maturity of the domestic cash borrowing displayed a year-on-year increase in
2013, thus pulling the term-to-maturity of the domestic debt stock to 35.9 months
(Chart 6.2.3). External borrowing by bond issues amounted to USD 1.7 billion,
with the average maturity declining to 11.3 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 Domestic Debt Stock
Average Maturity of External Borrowing (year)
Average Maturity of Domestic Cash Borrowing
68,3
Maximum Maturity of External Borrowing (year)
70
35
60
60
30
50
50
25
40
20
30
30
15
20
20
10
10
10
5
1
0
0
0
0
70
8
7
6
5
40
35,9
Source: Treasury.
120
3
2012
2013/3
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2
2001
2013/3
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
4
* Denotes total external borrowing for the relevant year.
Source: Treasury.
Inflation Report 2013-II
Central Bank of the Republic of Turkey
Domestic debt rollover ratio is 85.7 percent as of end-February 2013
(Chart 6.2.5). The average real interest rate at discount auctions, which
slumped from the onset of 2009 to the beginning of 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)
Maturity (day)
110
Average Compounded Interest Rate (right axis)
110
Real Interest Rate (right axis)
100
100
800
35
700
30
600
25
500
90
85.7
20
90
400
89.3
15
300
80
81.4
70
80
70
2003
2005
2007
2009
2011
2013/2
10
200
100
5
0
0
0104
0704
0105
0705
0106
0706
0107
0707
0108
0708
0109
0709
0110
0710
0111
0711
0112
0712
0113
84.5
Source: Treasury, CBRT.
Inflation Report 2013-II
121
Central Bank of the Republic of Turkey
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Inflation Report 2013-II