Turkey’s cash budget ran a deficit of TRY9.85bn (€2.32bn) in September versus a TRY2.97bn surplus in August and a deficit of TRY16.5bn in September last year, treasury data showed on October 6.

Cash revenues increased by 32% y/y to TRY47bn while expenditures increased by 8% y/y to TRY57.2bn.

Interest payments were up 35% y/y to TRY8.56bn and non-interest expenditures rose by 4% y/y in the month.

Consequently, the primary cash budget produced a primary deficit of TRY1.64bn in September, down from TRY11.3bn in September 2016.

Across January-September, the cash deficit rose by 93% y/y to TRY40bn while the cash budget produced a primary deficit of TRY5.11bn versus a primary surplus of TRY6.24bn a year ago.

Turkey’s budget deficit widened 25% to TRY29.3bn last year.  The government’s central budget shortfall estimate for 2017 is 2% of GDP, or TRY61.7bn, according to the latest Medium Term Programme unveiled on September 27.

Also on September 27, the government introduced hikes in a number of taxes, including a 2 percentage-point increase in the financial sector’s corporate tax rate to 22%. It also raised the motor vehicle tax on passenger cars by 40%.

New tax measures announced on September 27 within the three-year economic programme will add TRY 27-28bn to budget revenue next year, according to Finance Minister Naci Agbal.

Turkey plans to earmark up to TRY18bn for additional defence spending next year and the extra costs will be met mainly from tax income rather than borrowing, Deputy PM Mehmet Simsek said on October 5.

Simsek also said that changes to the income tax regime would be introduced in the first half of next year.

The new economic programme foresees tax revenues rising from TRY535bn this year to TRY614bn next year.