ANKARA - TEPAV, expressing that the claims that budget target had been achieved cannot be considered realistic in terms of budget credibility, maintained that in 2008, the worst fiscal performance in the last 9 years was demonstrated.

TEPAV Fiscal Monitoring Group released the "2008 Central Government Budget Pre-evaluation Note". The evaluation underlined that, according to the results of the temporary budget implementation results for the fiscal year 2008 as announced by the Ministry of Finance, central government budget deficit stood at 17.1 billion YTL and lagged behind the initial estimates for budget deficit, which was 1.9 billion YTL. The statement pointed out that, since budget deficit, which was estimated to be 14.1 billion YTL a few months before the end of the year, realized at a much more higher level at the end of the year, it is not possible to consider the claim that initial budget target was achieved as a realistic approach in terms of the credibility of the budget. The statement said:

"As touched upon by our previous reports, transfers from Privatization Fund or Unemployment Fund, which shall not be recorded as revenue items, are included in the budget, while Housing Support (KEY) payments that shall be included in the budget are left and paid out of the budget. By this way, it is sought to make the central government budget seem "nicer" at the cost of deteriorating the fiscal condition of the Unemployment Fund and Privatization Fund. Despite these, central government budget deficit a lower value for which was estimated stands at a much higher level with a deviation of approximately 22 % just a few months after the date that the estimations were made. Making targets volatile and claiming under these circumstances that the targets are achieved, fiscal discipline is maintained and a good budget management performance was ensured signalize a serious problem of inconsistency."

Worst fiscal performance of the last 9 years … TEPAV underlined that program described / adjusted primary surplus, reflecting the actual fiscal performance, stood at 18 billion YTL approximately 14 billion YTL below the initial targets and 7 billion YTL below the realization estimates, and maintained: "This situation points out the worst fiscal performance since 2000, when the implementation of stabilization programs was initiated.

While the ratio of primary budget surplus (program defined / adjusted) calculated by excluding nontransparent interventions, ad-hoc measures and similar transactions carried out throughout the fiscal year to the GDP transcended 4 %, the same ratio for 2008 fell down to 1.8 % indicating the worst fiscal performance in the last 9 years. The ratio further falls down to 1.6 % level as the Housing Support payments are included.

The evaluation by TEPAV suggested the following concluding remarks:

"It is observed that while the performance of the budget expenditures for 2008 fiscal year is based on measures like nontransparent recording systems, deferred expenditures the quality of which can be suspected, balance is tried to be maintained via transferring the liquid assets of other public agencies to the account of the revenue items of the central government budget. Despite all, the erosion observed in the Turkish Tax System that is based on indirect taxes and directly affected by growth (through the change in the level of aggregate demand) seems to have more and more impact on the inability to achieve fiscal performance targets.

The case observed for 2008 fiscal year seems to have already risked the credibility of the budgetary estimates for 2009."

Fiscal Monitoring Report including a comprehensive evaluation of TEPAV for 2008 fiscal year budget implementation results will be released soon.