REFORM PROCESS IN TURKISH REFORM PROCESS IN TURKISH PUBLIC FINANCE MANAGEMENTPUBLIC FINANCE MANAGEMENT

andandFISCAL POLICYFISCAL POLICY

Z. Zeren ÇAKMAKFinance ExpertDG Budget and Fiscal ControlMinistry of Finance

Pre-Reform Status in Turkey

The Turkish economy came up against economic crises at more frequent intervals especially after the financial liberalization process in 1989. With the crises in 1994,1999 and 2001, the "sustainable growth" discussions accelarated in our country.The problems seen in the public finance management came along with the macro-economic problems such as unbalanced growth, not able to bring up the inflation to the desired levels and high public sector borrowing requirement.

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Problems in the Public Finance Management before the Reform

A medium and long term financial program could not be followed considering obtainable resources,

The General Accounting Law No:1050 which was put into force in 1927 and regulates the financial issues did not respond the needs of the era,

The financial discipline could not be ensured,

There was no sufficient link between the development plan and programs, and budgets,

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Problems in the Public Finance Management before the Reform

The budget implementations are limited to the fiscal year,

There is no multi-annual budgeting,

The top-down approach is dominant in the budget preparation,

The initial budget appropriations are not binding,

The efficiency cannot be ensured in resource allocation and usage.

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Reform Studies

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The fact that a sustainable financial discipline cannot be ensured is the one of the main significant reasons for the problems in the macro-economic and financial area, which led the way for the reform studies.

Reform Studies

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In 1995, the "Public Finance Management Project" was carried out between the Ministry of Finance and the World Bank.

Further studies were carried out on the outcomes of the project with the World bank.

In the 8th Five Year Development Plan, the programs of 2001, 2002 and 2003 and the 58th Government Urgent Action Plan, the reform need has been emphasized.

Reform Studies

At the end of 1999, within the framework of IMF 17.th stand-by agreement, IMF Fiscal Affairs Department prepared Fiscal Transparency ROSC.

In the report, after addressing to Turkey’s problems in its fiscal system, the important elements concerning the medium term expenditure framework were indicated among the measures to be taken by the government.

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Reform Studies

Within the scope of the reform efforts;

Say2000i system has been established,

The Law of Central Bank has been amended,

Public Procurement Law and Public Procurement Contracts Law

have entered into effect,

Public Finance and Debt Management Law has entered into force,

Revenue Management has been restructured. 8

Reform Studies

Funds have been removed substantially,

E-Budget system has been established,

Analytical Budget Classification system has been adopted and

Public Finance Management and Control Law No. 5018 has

entered into force, 9

Law No. 5018

Changes brought by Public Finance Management and Control Law No. 5018

Fiscal Discipline

Fiscal Transparency

Accountability

Accruals Accounting 10

Accounting Unity in the Public and Issue of Financial Statistics

Effective, Economic and Productive Use of Resources

Determination of Policies and Priorities

Internal Control

Internal Audit

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Law No. 5018

Law No. 5018

Performance-Based Budgeting

Strategic Planning

Medium Term Spending Framework

Medium Term Program

Medium Term Financial Plan

Three-Year Budget Projection Involving Income and Expense Expectations of

the Present Year and Following Two Years

Establishing Relations Between Planning and Budgeting

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Reforms and Fiscal Policy

As a result of these reforms made in the field of

Financial Management, substantial achievements have

been generated in this field in our country.

Within this context, fiscal discipline has been

strengthened, transparency has been enhanced and

accountability has come to the forefront.

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Fiscal Policy

Decreasing of budget deficit,

Following a strong primary surplus policy,

Acceleration of privization

have been the main elements of fiscal policy during the

last 10 years.

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Fiscal Policy

Thanks to the prudent and steady financial policies

implemented, the ratio of public debt stock to GDP has

been reduced dramatically.

Again thanks to the fiscal discipline implemented

determinedly, the ratio of interest expense to GDP

decreased rapidly.

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Fiscal Policy

As a result of the political and economic stability and the

macroeconomic and structural policies implemented, the

ratio of budget deficit to GDP has substantially

decreased since 2003.

Great importance is attached to the policy of having

primary surplus while providing sustainability in public

finance.

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Budget Deficit/GDP (%)

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11,5

8,8

5,2

1,1

0,6 1,6 1,8

5,5

3,6

1,4 2,1

2,2

0,0

4,0

8,0

12,0

16,0

20,0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Bütçe

(%)

Primary Surplus/GDP (%)

3,3 4,

0

4,9

6,0

5,4

4,2

3,5

0,0 0,

7

1,9

1,3

1,2

0,0

2,0

4,0

6,0

8,0

10,0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Bütçe

(%)

Interest Expenditure/GDP (%)

14,8

12,9

10,1

7,0 6,1 5,8 5,3 5,64,4

3,3 3,4 3,4

0,0

4,0

8,0

12,0

16,0

20,0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Bütçe

(%)

77,9 74,067,7

59,652,7

46,5

39,9 40,046,1

42,339,1

36,2 35,0 33,0 31,0

20

30

40

50

60

70

80

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

*

2014

*

2015

*

Maastricht Criteria: % 60 Medium Term Program

EU Defined Debt Stock/GDP(%)

Source: Treausry* MTP

THANK YOU FOR YOUR ATTENTION

zeren@bumko.gov.tr

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