Turkey’s Budget Swings to Record Surplus as Fiscal Policy Shifts

(Bloomberg) -- Turkey posted its biggest monthly budget surplus on record as the government shifts to repairing public finances to complement monetary policies geared toward bringing down inflation.

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The central budget balance recorded a 219 billion-lira surplus ($6.7 billion) in May, the most in data that stretches back to 2006. It was a sharp swing from five straight months in deficit, figures published by the Treasury and Finance Ministry showed on Thursday.

The Turkish government is on course for tighter fiscal policy with recent measures that include cuts to spending as well as a wide range of new plans such as introducing a minimum tax on companies.

The proposals — meant to generate additional revenue estimated at $7 billion — will be debated by lawmakers and are likely to be ratified given President Recep Tayyip Erdogan’s ruling AK Party and its allies control a parliamentary majority.

Personnel spending and current transfers — which include social aid to households — were offset by a sharp increase in tax revenue, which accounted for the bulk of the government’s income last month.

While the latest figures show a sharp improvement, the budget remains deep in the red so far this year, on track for a shortfall that’s likely to be among the widest of Erdogan’s two decades in power.

The gap in the first five months has reached 472 billion liras, with the government’s outlook putting this year’s total deficit at 2.7 trillion liras or 6.4% of gross domestic product.

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