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Turkey April Budget Surplus Rose After Non-Tax Income Jumped

Turkey’s budget surplus widened 34 percent to 1.4 billion liras ($780 million) in April as a dividend from the central bank more than offset growth in government spending.

Revenue increased an annual 24 percent last month to 29.1 billion liras, with non-tax income jumping to 8.3 billion liras from 3.4 billion liras a year ago, the Finance Ministry in Ankara said on its website today. Revenue from taxes rose 3.5 percent to 20 billion liras, it said.

Turkey’s budget benefited from a one-time central bank dividend payment of 5.7 billion liras, reversing what would otherwise be a deficit. Expenditures expanded more than five times faster than revenue amid a slowdown in the economy. Growth in 2012 is forecast by the government to to be less than half the 8.5 percent pace last year.

“This is not very encouraging,” said Ozgur Altug, chief economist at BGC Partners, a brokerage in Istanbul. “The deterioration will become more crystallized with each passing month. It won’t have short-term impact, but if the trend continues in the long term. it will carry Treasury borrowing costs higher.”

Two-year benchmark bond yields dropped 3 basis points, or 0.3 percentage point, to 9.53 percent at 1:29 p.m. in Istanbul. The lira gained 0.28 percent to 1.8046 against the dollar.

Tax Revenue

Turkey’s budget performance has deteriorated as an increase in tax revenue slowed along with economic growth, Finance Minister Mehmet Simsek said in e-mailed comments. Import-tax collection fell, spurred by measures to narrow the current-account deficit. Simsek suggested that tax revenue will rise again as the economy recovers in the second half.

The government has yet to incur pay raises to public employees, which will be subtracted from the budget with a five-month delay, Altug said in a telephone interview. “This month was saved by transfers from the central bank’s bulky profit and state-owned lenders’ profits. It brought on great relief.”

Negotiations between unions representing public workers and the Labor and Social Security Ministry hit a wall yesterday, when workers rejected a 6 percent pay raise this year and 5 percent increase in 2013. The unions asked the government to come back with another offer by tomorrow and called for a nationwide strike today.

Total Spending

Total spending climbed 23 percent to 27.7 billion liras and spending, excluding interest payments, rose 18 percent, the Finance Ministry said. Interest spending jumped 64 percent to 4.6 billion liras, according to today’s report.

Excluding interest payments on debt, the budget surplus last month was 6.1 billion liras compared with a surplus of 3.9 billion liras in April 2011, the Ankara-based ministry said on its website today.

“Continuation of the weak underlying trend in tax revenues due to the economic slowdown and heightened primary expenditures in April recalls existing risks to budget targets,” Ibrahim Aksoy , an economist at Sekerbank TAS in Istanbul, said in an e-mailed report.

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