Istanbul (Reuters) – The Turkish budget deficit widened to 219.6 billion lira ($8.37 billion) in June, seven times the deficit a year earlier, data showed on Monday, while state media said institutions had been told to review their expenditures.
The primary deficit, which excludes interest payments, widened to 182.3 billion lira from 18.29 billion a year earlier, according to the Treasury data. In the first half, the budget deficit amounted to 483.2 billion lira.
State-owned Anadolu news agency reported on Monday that a circular signed by Finance Minister Mehmet Simsek had been sent to all state institutions reminding them of the need to make savings, reduce bureaucracy and use resources effectively.
“We will rationalise public expenditure,” Simsek said on Twitter, sharing a link to the Anadolu story.
The circular called for the review of all expenditures except those related to the devastating earthquakes which hit southern Turkey in February, killing more than 50,000 people.
Turkey raised the tax on petrol on Sunday as part of moves to boost revenues after the sharp rise in spending related to the earthquakes and May presidential and parliamentary elections.
Turkey’s parliament has also approved an extra budget of 1.12 trillion lira for this year, which followed various other recent tax increases among efforts to bolster government coffers, including a two percentage point increase to value-added tax (VAT) and a five percentage point hike to corporate tax.
While aimed at tackling the budget deficit, the tax hikes are seen stoking inflation, which declined to 38.21% in June from a 24-year high of 85.51% last October. Economists said month-on-month inflation could reach double digits in July, with the impact from tax hikes also to be felt in August.
