Turkey: Budget turns into surplus with strong tax collection in January


According to the January budget data announced by the Ministry of Treasury and Finance; The central government budget, which had a deficit of 145.7 billion TRY in December 2021, gave a surplus of 30 billion TRY (2.2 billion USD) in January 2022. The budget had a deficit of 24.2 billion TRY in the same period of last year. As stated in the Monthly Budget Realizations Report, the primary deficit, which was TRY 2.2 billion in January 2021, became TRY 44.3 billion in January 2022. Revenues increased by 96% between January 2021 and January 2022 to reach 176 billion TRY, increasing in real terms when adjusted for 48.7% consumer inflation. The increase in revenues was due to the increase in tax collection, which increased by 86% to TRY 147.4 billion. The lion’s share came from the 2.963% increase in corporate tax collection, which reached TRY 14.5 billion. The high increase in tax revenues compared to last year seems to have been effective due to tax deferrals in January 2021. General government expenditures, on the other hand, increased by 28.3% in the same period and reached 146 billion TRY. Non-interest expenditures increased by 44% to TRY 131.7 billion in January, driven by current transfers and personnel expenses. Interest expenditures decreased by 35% to TRY 14.2 billion due to the decrease in TRY-denominated bond expenses.


The Treasury posted a cash budget deficit of TRY 37.8 billion in January. The central government budget posted a surplus in January after a record deficit in December. Income from corporate tax has also increased. The budget surplus is expected to increase in February due to the Central Bank’s 2021 net income. The Central Bank will complete the distribution of 49.3 billion TRY of profit and most of the reserve funds to the government this month. On the tax revenue side, we expect a decreasing contribution with the effect of the application within the scope of reducing VAT to 1% in basic food products. Apart from VAT, we expect a lower contribution to the SCT revenues, which supported the budget revenues by making an increasing contribution before, due to the decrease in consumption because of the epidemic effect and inflation. In order to protect consumers from the negative effects of inflation, the government’s giving up on VAT and SCT revenues at a certain rate, together with the subsidy effect on the food and energy side, may continue to have a restrictive effect on budget revenues.


On the side of the government’s general budget expenditures, both possible financial incentives for the implementation of growth targets and increasing cost factors with the increase in global energy prices may boost expenditures. In the public sector, the savings and expenditure effects within the scope of personnel, building and vehicle expenditures should also be monitored for financial discipline regarding expenses. Another point we will pay attention to regarding the financial deficit is the financing expenses arising from the currency protected deposit product. In the upcoming period, the movement of exchange rates will be an important criterion for the budget performance in terms of funding this product.

Kaynak Tera Yatırım-Enver Erkan
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