THE 1995 budget programme announced on 15 October calls for a steep reductions in the deficit and predicts a sharp fall in inflation.

The main points are:

A budget of TL 1,331 million million ($38,000 million) and a deficit of TL 198 million million ($5,560 million) amounting to 4.6 per cent of gross national product (GNP).

Year-end inflation target is 22.5 per cent.

Exports are forecast to rise to $19,500 million and imports to total $27,000 million.

Growth in overall GNP is expected to be 4.4 per cent.

Interest payments are predicted to total TL 388 million million ($13,600), amounting to 29.1 per cent of the budget aggregate.

Expenditure in 1995 will increase by 50 per cent from the expected outlay of

TL 909 million million ($26,000 million) in 1994.

The wages of state employees will total TL 420 million million ($12,000 million).

Total government revenue is expected to rise to TL 1,133 million million ($32,400 million) in 1995. This includes boosted tax proceeds totalling TL 880 million million ($25,000 million).

The proposed state revenues in the 1995 budget do not include proceeds from privatisation. In draft legislation expected to be approved by parliament soon, proceeds from the sale of state economic enterprises (SEEs) are to be paid into a special fund for the preparation for the denationalisation of other SEEs, and will provide a safety net for workers whose jobs are at risk from privatisation.

Finance Minister Ismet Atilla says the draft budget adheres to the rigour of the government’s 5 April recovery programme. The recovery programme has already achieved significant success in 1994, he adds. In the first nine months, the budget deficit had been reduced by 38.8 per cent in real terms compared with the same period in 1993. However, economic growth is expected to contract by 3.8 per cent compared with the 1993 growth figure of 7.6 per cent.

Critics say the draft is unrealistic, particularly in its goal of reducing inflation to 22.5 per cent in 1995 from the figure of around 100 per cent anticipated in 1994. Budget deficits and the pressures they create have been the root cause of high inflation in Turkey since the mid-1980s.

The expected 1995 increase in tax revenues is optimistic, say analysts, because the tax base has shrunk with the contraction of the economy. Moreover, many companies may file loss claims instead of paying corporate tax on profits. With the recession likely to continue through much of 1995, the government will also find it difficult in 1995 to repeat the kind of one- off levies, largely on corporate wealth, planned in the 5 April package. These have been largely responsible for the boost in tax revenues during 1994.

On the spending side, the government will have trouble holding down public- sector wages for a second year running. Many two-year collective bargaining agreements in the state sector come up for renewal in 1995.

Unless sweeping privatisation is achieved in 1995, it seems unlikely that the government will be able to keep transfers to SEEs to the target of TL 21 million million ($600 million) compared with the TL 36.5 million million ($105 million) set out in the 1994 budget. Many SEEs will be forced to increase their prices to cover their deficits, adding inflationary pressure, say the critics.