ANKARA- TEPAV expressed that increasing the borrowing limit as per the "Torba" Law which is still on the agenda of the Grand National Assembly of Turkey (GNAT) means loosening the only fiscal rule in effect, ironically in a period where the necessity of introducing fiscal rules are being discussed. The statement also noted that "Carrying out a legal arrangement which increases the borrowing limit rather than submitting an additional budget draft to the GNAT leads to the exclusion of the legislative authority, who on behalf of the public holds the budget right, the most important supervisory element in democracies."

Fiscal Monitoring Report - 2009 April Budget Results prepared by TEPAV Stability Institute was announced.

Apart from budget implementation results, the report contained a section entitled "Changes in Borrowing Limit and the Budgetary rights of the GNAT". The section underlined that with the draft law which is still negotiated in the TGNA and which is known as a "Torba law" by the public, the borrowing limit promulgated in the 5th article of No 4749 Public Financing and Debt Management Law is quintupled.

The report emphasized that due to the fall in revenues under the impact of the ongoing global crisis, inability to control expenditures and the constraints in privatization opportunities budget deficit has passed beyond the originally estimated level even at the beginning of the fiscal year and is expected to increase further. The report maintained:

"Under these circumstances, the borrowing limit has already been exceeded and thus an illegitimate situation has appeared. Let us examine the legal consequences of this illegitimacy, if not overcome it by the end of the year. Theoretically, upon the inspection of Treasury transactions, Treasury officials other than the Minister may be considered as political responsible for exceeding the power before the Court of Accounts. However, this is seen as a weak possibility. A higher possibility is that the Court of Accounts can leave the authority to impose sanctions to the discretion of the TGNA as the situation occurred for the first time. As a matter of fact, we are of the opinion that the Mixed Law is submitted to the GNAT to overcome this type of "legally undesired outcomes".

How will the limit be calculated?

The report states that the impression from the discussions in the Planning and Budgetary Commission on the Torba Law implies that there are still some question marks about how to calculate the limits, and expresses that there are two different opinions about this. The report added:

"Proponents of the first opinion directly interpret the legal texts given above literally and calculate the borrowing limit as 74.8 billion TL. Considering in terms of the central government budget the limit appears to be 74.2 billion TL. Despite this, the second opinion we adopt, on ground that the legal texts must be interpreted in terms of its purpose rather than literally, underlines that borrowing limit cannot be raised to 74.8% by quintupling the original limit as per the Mixed Law; rather only 57.9% of borrowing authority can be attained."

Budget Right is Violated

The report pointed out that carrying out a legal arrangement which increases the borrowing limit rather than submitting an additional budget draft to the GNAT eliminates the opportunity for the GNAT to have a say on the fiscal policies to be implemented throughout 2009 and thus violates the budget right. Stating that in this context, the revisions to be introduced in the Medium Term Program and Medium Term Fiscal Plan to be announced in the upcoming days do not have any meaning, the report said: "Because they are the discretions of the government. Differing from the past, the paradigm of the authority to make the budget assigned by the GNAT has been changed completely and a new situation was created. Consequently, it is necessary to submit a new additional budget draft defining the new situation as well as a concordant borrowing limit to the GNAT to enable the legislative authority having a say on the issue."

Budget Deficit will Grow

Evaluating the budget results, the report said that according to the budget implementation results announced by the Ministry of Finance, central government budget had a deficit of around 20 billion TL as of the end of April, high above the deficit estimated for the fiscal year 2009 overall. The evaluation maintained: "Therefore, April implementation results together with the results attained over the first quarter of the year have confirmed that the budget deficit is almost two-fold the original estimates and that the deficit will grow further by the end of the year."