In the face of dire economic conditions and elections atmosphere, the government of Turkey adopts unorthodox measures in order to slow down the deterioration of economic parameters.
The “legal reserves” are recorded from each years’ profits by the law to be used under extraordinary circumstances. Transfer of legal reserves to government budget reminds other unorthodox economic steps AKP have taken before such as using unemployment funds to polish trial balances of government banks or selling billions of dollars from state banks in order to support the lira.
Although 37 Billion Liras were transferred from the profit of the Central Bank to the government budget in January, Turkey’s budget recorded 36.2 billion TL loss in the first quarter of 2019. According to anonymous sources cited by Reuters, the budget deficit is deeper than expected and Ministry of Treasury is working on legislation to transfer the 40 billion lira ($6.6 billion) in legal reserves of the central bank to the government’s budget.
Tax cuts and additional spending due to elections on March 31 have deteriorated government budget. The preparation on the above-mentioned legislation to transfer legal reserves of the CB to the government budget and cancellation of the legitimate mayoral election in İstanbul indicate that the fiscal tightening expected after March 31 local elections will probably be postponed after June 23, the date set for new elections.