Türkiye announces major public spending cuts

In a bid to curb surging inflation and restore fiscal discipline, Türkish Finance Ministry unveiled an extensive savings plan aimed at reining in public spending.

Vice President Cevdet Yılmaz and Treasury and Finance Minister Mehmet Şimşek announced a new “Public Savings Plan” on May 13 at a joint briefing.

The savings plan comes as Türkiye grapples with an annual inflation rate that soared to 69.8 percent in April, with forecasts indicating a potential peak of 75-76 percent in May.

New “Public Savings Plan”

The measures outlined in the plan include pausing new vehicle purchases and rentals by public institutions for three years, as well as halting the construction of new government buildings.

Finance Minister Simsek emphasized the importance of directing investments towards effective areas while accelerating structural reforms and improving public finances.

Significant savings are also expected in public sector employment, energy, waste management, and communications, although specific figures were not provided.

The savings plan, expected to yield approximately 100 billion Turkish Lira in savings reflects Türkiye’s commitment to restoring investor confidence through fiscal management.

The implementation and monitoring of these measures will be overseen by the Ministry of Treasury and Finance, with new mechanisms established for accountability. The Presidency will have the authority to enforce administrative penalties and fines, ensuring compliance across all levels of government.

Restriction on vehicle usage, halt on new building leases

• Restrictions on Vehicle Usage: Standards will be introduced for the management and usage of government vehicles, with a three-year moratorium on new vehicle purchases and leasing. Existing vehicle leases will require approval for renewal, and surplus or obsolete vehicles will be disposed of.
• Halt on New Building Leases: Except for buildings at risk of earthquakes, the construction of new government buildings will be suspended for three years. Standardized square meter allocations will be introduced for government premises, and existing buildings will be assessed for efficient utilization.
• Personnel Restrictions and Salary Caps: Public sector employment will be capped at the retirement rate for three years, with clear guidelines for open recruitment. Additionally, there will be limits on management board salaries, with bureaucrats’ excess incomes directed back into the budget.
• Efficiency Enhancements: Internal training activities will be conducted in public facilities, and temporary overseas assignments will be restricted. LED conversion for street lighting, energy efficiency improvements in public buildings, and transitioning to electronic communication systems are also prioritized.
• Reductions in Promotional Expenses: Promotional expenses will see a 25 percent cut in 2024, with ongoing restrictions in subsequent years. Exceptions include international meetings and national holidays, while activities such as receptions and gifts will be prohibited.
• Investment Allocation Cuts: Investment budgets will see a 15 percent reduction, with a focus on projects showing significant progress, earthquake-related initiatives, and those enhancing food supply, green, and digital transformation. Public investments with extended timelines, excluding those in irrigation, energy, and railroads, are set to be largely halted. The savings package aims to prioritize completion of public projects with shorter durations and lower costs, ensuring efficient resource utilization. This strategy is anticipated to yield a 15 percent reduction in overall investment allocations.