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Budget: Turkey’s mysterious saviour

Ankara ought to reveal the source of a $15 billion windfall in its budget.

The Turkish government needs to give more details on why there has been such a big increase in its budget’s net errors and omissions. Inflows from this margin have reached some $15 billion over the past year. Various explanations have been offered; none is satisfactory. What is clear is that the money has saved the currency from a more severe decline and helped delay an IMF deal.

One explanation is that a tax amnesty has been the cause of the inflows but the government has not given sufficiently precise details of the amnesty’s success. Barclays said in September that the higher errors and omissions in the budget could be driven by repatriation of collateral from abroad as Turkish residents have tried to retain good loan conditions through the recession. However, some say both of these types of capital inflow should go through the official banking system, and are therefore inappropriate for the errors and omissions margin.

Euromoney has heard speculation that the inflows might be attributable to an increase in US spending in northern Iraq during elections in Kurdistan (the border between Turkey and Iraq is porous). Even scarier answers have been given. Three Iranian opposition politicians have written to the IMF saying that the money was Iranian and should be returned.

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