ANKARA- TEPAV has announced that the budget has had a deficit of 7.4 billion YTL as of end of August, contrary to the declaration of the Ministry of Finance that it has had a surplus of 4.6 billion YTL. Economic Policy Research Foundation of Turkey (TEPAV) Stability Institute has released the Fiscal Monitoring Report -August 2008 Budget Results. The report also includes a section titled "Some Assessments on the Medium-Term Program (MTP) and the Medium-Term Fiscal Plan (MTFP)".
Noting that there have been two important developments in previous months that could render the budget numbers discussable, the report mentions that the first of these is the fact that the resource which is transferred from the revenues of the Unemployment Insurance Fund and the Privatization Fund has been recorded in the budget as revenue. The report discusses the issue as follows: "The resource which has been transferred from the Unemployment Insurance Fund is an amount that is owned by the Fund as a stock and that was presented in previous periods within public sector revenues; and this resource has now been placed within the budget revenues, being presented anew as revenue. In other words, the same resource has been presented within total public sector revenues (first as Unemployment Fund revenue, then as budget revenue in another period) in two different periods. The resource that has been transferred from privatization collections has also undergone a similar practice. It is observed that an item which was previously recorded as revenue in the public accounts as a result of asset sales has been recorded as budget revenue this time.
Based on the treasury cash balance data, the amount of such resources that has been transferred from the Unemployment Fund and the Privatization Fund and that has been recorded as revenue has reached about 8 billion YTL." The report notes that the second development that could render the budget numbers controversial is about the Housing Benefits (KEY). Reminding about KEY that the Treasury has paid about 2.8 billion YTL through the T.C. Ziraat Bank to right-holders, the report maintains that these payments have been made without appropriations, so that the budget deficit has been calculated as less as this amount.
The report states: "We believe that both practices are misleading in terms of accounting logic and the matching principle. Consequently, we foresee that the budget was finalized as of end of August with a deficit of at least 7 billion YTL, unlike the declaration of a surplus of 4 billion YTL. Since correct analysis requires the use of correct and analytical data, we would like again to address such practices and the importance of fiscal transparency". The report notes that the budget deficit, based on this definition, was 15.1 billion YTL in the same period last year, and that this deficit has declined by 50.8 per cent this year.
MTP is not a stability program
TEPAV report emphasizes the fact that MTP is more of a document of guidance and prioritization. Addressing the recent views which argue that the document in effect should serve as an economic stability program, the report continues as follows: "We believe that it is in effect not a realistic approach to attach such great importance to this document recently, which has not attracted much attention for four periods since the year 2005. We are of the opinion that this situation results from the "hopes for help" from the MTP as it were, now that the stand-by arrangement with the IMF has ended."
Regulated Fiscal Policy must be supervised by the Parliament
TEPAV's report also includes remarks on the regulated fiscal policy which is addressed in the MTFP. The report addresses the questions of "which indicator is to be selected as the fiscal rule" in regulated fiscal policy practices and of "who is to supervise whether this indicator is complied with", and makes the following remarks:
"Regarding which rule is more relevant in the context of our country; we should stress the fact that any government, which has decided to spend and to disturb the budget balance, will ignore any obstacles, no matter what rules are introduced. This situation has become very apparent in our country with the governments that have had the propensity to break the rules even under the IMF supervision. Taking this factor into consideration; if there is to be a fiscal rule, we believe that the most practical indicator in this regard will be the introduction of a ceiling above spendings. We are of the opinion that other indicators will bring about more problems in terms of both measuring and comprehension by the public.
With regard to the subject of who should be in charge of supervising the regulated fiscal policy; we believe that the sole supervisory body should be the "Parliament". It is necessary in a representative democracy for the parliament, which delegates the authority to spend and to collect revenues to the government, to supervise how this authority is used. It is indeed debatable how the parliament, which is beset by the executive, is to succeed this. The first step to do this is to make effective the amendments in the Parliament Internal Regulations that are on the agenda of the National Assembly."