Turkish government angling ‘to access more funds from central bank’

Turkish government angling ‘to access more funds from central bank’
By Akin Nazli in Belgrade October 23, 2019

Turkish central bank officials have discussed making an accounting change to book the national lender’s unrealised gains and losses in its so-called revaluation account, accrued due to changes in the market value of its foreign-currency and gold holdings, an unnamed person familiar with the matter told Bloomberg on October 22.

The move, if realised, would pave the way for the central bank to record higher profits and subsequently transfer higher dividends to the Treasury.

It is unclear how advanced the discussions are or whether they would result in a policy change, according to the news agency.

The central bank had Turkish lira (TRY) 61bn ($11bn) in its revaluation account as of October 21.

Even TRY80bn of transfers from the central bank to the Treasury so far this year has not stopped the widening of the government budget deficit. The Treasury’s policy of focusing on short-term borrowing since last year with the aim of avoiding the payment of high interest rates in the long run caused an accumulation of debt redemptions in 2020.

Domestic Government Debt Auctions and Borrowing Programme
(TRY bn) Total Public Yield
Auction Maturity Paper Bids Sold B S (%)
10-Jun 05/13/2020 336-day Zero Coupon (new) 6.9 5.3 1.1 1.1 24.45
10-Jun 06/05/2024 5-year CPI-indexed Semi-annual Coupon (new) 2.8 2.2 0.4 0.4 4.15
11-Jun 04/21/2021 2-year Fixed Semi-annual (benchmark) (re-open) 4.4 3.5 1.1 1.1 22.83
11-Jun 08/06/2025 6-year floating semi-annual (re-open) 2.6 2.1 0.4 0.4 20.89
18-Jun 06/16/2021 2-year lease certificate (direct sale) (semi-annual)   1.6     10.55
18-Jun 12/11/2019 6-month lease c. (to pension funds, unscheduled) 3.9 2.1 - - 23.49
8-Jul 09/16/2020 434-day Zero Coupon (new issue) 12.7 9.7 0.8 0.8 20.6
8-Jul 06/05/2024 5-year CPI-indexed semi-annual (re-open) 3.3 2.6 0.4 0.4 4.17
9-Jul 10/09/2019 3-month bill (new issue) 3.7 2.1 0.1 0.1 22.25
9-Jul 04/21/2021 2-year Fixed Semi-annual (benchmark) (re-open) 7.7 6.1 1.8 1.8 19.35
9-Jul 08/06/2025 6-year floating semi-annual (re-open) 4.2 2.9 0.8 0.8 20.3
July Borrowing Total Realization 31.7 23.3 3.9 3.9 -
19-Aug 09/16/2020 392-day Zero Coupon (re-open) 5.3 3.4 1.4 1.4 15.3
19-Aug 08/06/2025 6-year floating semi-annual (re-open) 2.9 1.2 0.2 0.2 22.65
20-Aug 08/10/2021 2-year lease certificate (direct sale) (semi-annual)   0.8     7.4
20-Aug 06/05/2024 5-year CPI-indexed semi-annual (re-open) 4.0 2.9 0.2 0.2 4.03
Aug Borrowing Total Realization 12.2 8.4 1.8 1.8 -
16-Sep 04/21/2021 2-year Fixed Semi-annual (benchmark) (re-open) 8.1 3.0 1.1 1.1 15.44
16-Sep 06/05/2024 5-year CPI-indexed semi-annual (re-open) 1.6 0.9 0.3 0.3 4
17-Sep 10/07/2020 385-day Zero Coupon (new) 4.7 2.7 0.5 0.5 15.18
17-Sep 08/06/2025 6-year floating semi-annual (re-open) 1.3 1.0 0.3 0.3 22.63
17-Sep 17/09/2021 Gold-backed lease certificate (kg) (6-month coupon)   17.0     1
17-Sep 17/09/2021 Gold-backed bond (kg) (6-month coupon)   4.0     1
21-Oct 01/08/2020 3-month bill (new issue) 2.1 1.3 - - 14
21-Oct 10/20/2021 2-year Fixed Semi-annual (benchmark) (new issue) 4.7 3.1 0.7 0.7 14.47
22-Oct 10/07/2020 350-day Zero Coupon (re-open) 3.0 2.2 0.5 0.5 14.18
22-Oct 06/05/2024 5-year CPI-indexed semi-annual (re-open) 1.2 0.6 - - 3.97
11-Nov 20/10/2021 2-year Fixed Semi-annual (benchmark) (re-open)          
11-Nov 06/11/2024 5-year CPI-indexed semi-annual (new)          
12-Nov 10/07/2020 329-day Zero Coupon (re-open)          
12-Nov 11/06/2024 5-year CPI-indexed semi-annual (direct sale)          
12-Nov 04/11/2026 7-year floating semi-annual (new)          
9-Dec   6-month bill & 2-year benchmark          
10-Dec   5-year CPI-indexed & 7-year floating          

The average maturity on the Turkish government’s domestic debt fell to 3.2 years in September from 3.9 years in 2018 and 4.2 years in 2017.

The Treasury is scheduled to redeem TRY75bn worth of lira debt in the first quarter of 2020, the highest figure seen since 2005, the year when the current data set was initiated.

The budget deficit grew by 51% y/y to TRY86bn in January-September.

Meanwhile, the government is working on a draft tax bill to increase income tax on high income levels and to reduce corporate tax levied on non-financials. A luxury real estate tax will also be introduced while vehicle and transportation expenses will be capped in terms of tax reductions.

The government is also planning to introduce a 7.5% tax on US technology companies including Google, Facebook and Amazon.

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