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Budgeting in Turkey

Budgeting in Turkey. Dirk-Jan KRAAN OECD Secretariat. Subjects of presentation. General characteristics of public finance management Key features of the budget formulation process Budget documentation for Parliament. Growth in real GDP Per cent change on previous year.

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Budgeting in Turkey

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  1. Budgeting in Turkey Dirk-Jan KRAAN OECD Secretariat

  2. Subjects of presentation • General characteristics of public finance management • Key features of the budget formulation process • Budget documentation for Parliament

  3. Growth in real GDPPer cent change on previous year

  4. Size of central and local government

  5. 50% 45% 40% Primaryrevenue Forecasts 35% Centralgovernment 30% Primaryexpenditure Centralgovernment 25% 20% Total expenditure Centralgovernment 15% 10% 5% 0% 2002 2003 2004 2005 2006 2008 2007 2009 Central government expenditure and revenues (per cent of GDP)

  6. General and Central government deficitPer cent of GDP

  7. 90 80 70 60 50 Forecasts 40 30 20 10 0 2002 2003 2004 2005 2006 2007 2008 2009 Net debt of public sector(per cent of GDP)

  8. Key features of budget formulation process • Centralisation and fragmentation • IMF Stand-by agreement as de facto fiscal rule • Detailed line item classification

  9. Centralisation and fragmentation • Strong top-down steering • Two central budget authorities • Complicated planning process

  10. Development Plan/Long-term strategy (SPO) Sectoral and thematic plans,Regional development plans,Provincial development plans, etc. Medium Term Programme (SPO) Medium-Term Fiscal Plan (MoF) Annual Programme (SPO) Annual budget (MoF) Annual Pblic Investment Programme (SPO) From long term plans to the annual budget

  11. Recommendations • Replace targets by ceilingsduring budget formulation • Introduce request stage for line ministries and agencies • Streamline planning procedures • Reposition State Planning Organisation as central forecasting and policy analysis institution

  12. The IMF stand-by agreement as de facto fiscal rule • Target: primary surplus of 6.5 per cent • Revenue windfalls can be used for debt redemption, tax relief and investment • Expenditure windfalls can be used for new spending • Stand-by agreement expires in 2008

  13. Recommendations • Maintain medium term expenditure targetbased on 6.5 percent GDP primary surplus • Move in the longer run to medium term expendituretarget based on total budget balancebelow 3 per cent GDP

  14. Detailed line item budget • Combination of institutional, functional, financing and economic classifications • Around 34.500 line item appropriations

  15. Recommendations • Reduce the number of line items to 10-20 per line ministry • Use only institutional/programmatic classification for budget • Maintain the existing classification for thefinancial accounts

  16. Budget documentation for Parliament • Multi-annual estimates disconnected frombudget line item estimates • Outcome estimates for current and previousyear disconnected from budget line item estimates • No “horizontal”explanation of budget estimatesand multi-annual estimates • No “vertical”explanation of budget estimates and multi-annual estimates

  17. Recommendations • Put outcomes of current and previous year as well es budget estimates and multi-annual estimates on the same line: b. Provide horizontal and vertical explanations for each line item

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