RIYADH: Turkiye is taking measures to reestablish fiscal discipline and control the level of the budget deficit, Finance Minister Mehmet Simsek said on Sunday.
The budget deficit for the first five months of the year was 263.6 billion lira ($10.12 billion), compared to 124.6 billion lira a year ago due to increased spending ahead of the May elections and the impact of February’s earthquakes in southern Turkiye.
“We will not allow permanent deterioration in public finance indicators by reestablishing fiscal discipline and taking budget deficit under control,” Simsek said on Twitter.
Additionally, Turkiye hiked value-added tax fees and consumer loan taxes on Friday.
A draft law discussed in the parliament seeks to increase corporate tax to fund rebuilding efforts after February’s earthquakes killed more than 50,000 people and left millions homeless in the south.
Simsek also highlighted that over 319,000 housing units would be built and delivered to people who lost their homes within one year.
He added: “The package, which is being discussed in the parliament, aims to reduce the impact of the additional costs caused by the earthquake on the budget. These regulations will also indirectly support taking the current account deficit under control.”
Toward the end of June, the lira slid 1.8 percent to a record low against the US dollar after the central bank simplified rules governing lenders’ holdings and foreign deposits, following its sharp interest rate hike the week prior.
The lira fell to 25.76 against the dollar, surpassing the week prior’s all-time low of 25.74.
This reflected a 27 percent drop so far this year, largely after the reelection of President Tayyip Erdogan, who has since moved to backtrack on his years of unorthodox economic policy, including slashing rates despite soaring inflation.
The central bank under the new governor, Hafize Gaye Erkan, recently raised rates by 650 basis points to 15 percent last month, a substantial tightening despite falling short of market expectations.
Then, a few days after that, it began rolling back parts of the dozens of rules and regulations it had adopted since 2021 that left debt, credit and forex markets heavily state-managed.
The apex bank said the steps were intended to free up markets and ensure stability.