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TEPAV: "Government's Fiscal Policy May Cost 45 Billion YTL"
10/06/2008 - Viewed 1992 times
ANKARA - TEPAV has calculated the estimated cost of the decisions for the fiscal policy of the government in the upcoming period to be around 40-45 billion YTL.
Economic Policy Research Foundation of Turkey (TEPAV) has released the Fiscal Monitoring Report-2008 March-April Budget Results prepared by the Economic Stability Institute. Besides the budget results, the report also includes a section titled "Medium-Term Fiscal Framework and Fiscal Policies for the Future: What Do the Debates on Softening Fiscal Discipline Mean?"
This section calculates the possible results, provided that the following decisions are implemented: "Housing Assistance Benefits", "Resource Transfer to Southeastern Anatolia Project (GAP)", "Resource Transfer under the Scope of the Employment Package from the Unemployment Fund", "Performing Mini Debt Write - offs Based on the Law on the Procedure of the Collection of Public Claims", "Increasing the Amount of Resources to be Transferred to Local Administrations from Tax Revenues of the Central Administration and Reducing the Amount of Deduction from the Resource to be Transferred", and "Mark up Payments to Contractors by Amending the Public Procurement Law". It is estimated that the cost of the implementation of these decisions may reach 45 billion YTL in total.
"MTFF has local elections in mind"
In its evaluations on the Medium-Term Fiscal Framework (MTFF), the report states that "With the assumptions it invokes in the public and expenditure plans that have not been explained in details, MTTF as a whole seems to reflect a preference for the upcoming local elections rather than implementing a consistent fiscal policy for the future". Other assessments are presented as follows:
1 - It is not possible at this phase to relate this document both to the Medium-Term Program and to the Medium-Term Fiscal Plan that are the two important policy papers of multi-year budgeting which should be prepared as to the Law No 5018. Therefore, it also does not allow consistent examination and inspection of the expenditure and resource-use preferences of the Government.
2- MTFF Document is the indicator that the public authority has opted for a serious change of paradigm in public finance in favor of forgoing the indicator of primary surplus. It is hence assumed that policies will be allowed that will expand expenditures; yet it is postulated that this situation will not affect the debt dynamics in a negative way. MTFF does not also have the transparency to test the internal consistency of these assumptions.
3- It is theoretically and practically debatable such comments as that the deficit to be monitored in MTFF will be the classical budget deficit, that the softening primary surplus is justified on the grounds to implement conjectural fiscal policy, or that declining primary surplus will not pose any problem in terms of " cyclically adjusted budget balance".
"Positive development in the Budget"
In the section where the budget results are assessed, the report notes that the central administration budget showed a deficit of 4.4 billion YTL at the end of March and of 5.4 billion YTL at the end of April, stating:
"This situation shows that the budget deficit in the first quarter of the year increased by 31.2% compared to the same period of last year. In April, the deterioration in the budget balance declined to 1.3% increase level compared to the same period of the last year. The March results showed deterioration in the relatively positive performance of the central administration budget in the first two months of the year; yet this situation displayed a considerable improvement in April".

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