Turkey: Government unveils package of measures to cut public spending

• All public institutions to be banned from spending on new vehicles, buildings for three years
• Recruitments at public sector to be limited to replace retired staff for three years
• Training, communication and organisational expenditures to be curbed
• 2024 budget allocation to be cut by 10% for goods-services purchases, 15% for investments
• Nominal size of package not disclosed, unofficial budget deficit forecast revised down to 5.2% of GDP or below for 2024

Finance Minister Mehmet Simsek unveiled the details of an earlier announced plan for public savings and efficiency at a press conference, broadcast by the CNNTurk news channel. The package aims to reduce public spending in various areas in an effort to support the central bank in the fight against inflation, Simsek said. He added that more fiscal measures will follow to back the disinflation process in the coming period. The savings package is binding for all public institutions, ranging from the central government and local government to state-owned enterprises and funds, Simsek noted. He also vowed a tight grip on the institutions with respect to the implementation of the savings plan and sanctions for failure.

Simsek grouped the targets of the public savings plan in eight priority areas. These included vehicles, buildings, employment, administrative organisation, temporary assignment in abroad, energy and waste management, communication, and other current expenditures. Below are the details outlined by Simsek:

• Vehicles and transport: Public institutions will stop buying and leasing new vehicles for three years, be subject to permission for renewing existing lease contracts. The use of imported vehicles will be banned with the exemption of the cases permitted in the law. Surplus vehicles at present will be liquidated. Except for defence and security, shuttle services for public personnel will be abolished in places where public transportation is available.
• Buildings: The government will suspend the purchase and construction of new public buildings for three years, except those at risk of earthquake damage. Public institutions will be banned from leasing new buildings, and existing lease contracts will be terminated in a certain period. The government will ban new purchases or lease of lodging buildings and social facilities permanently. Charges of rent on existing lodgings and social facilities will be revised.
• Employment: New recruitments at the public sector will be limited to replace retired staff for three years. The number of support personnel will be reduced gradually. The government will introduce a cap on board membership salaries for public personnel, and develop models of flexible and remote working at public institutions.
• Efficiency in public organisation: The government will limit administrative expansion of public institutions, and prevent duplicate restructurings. The ministries will review overseas organisations within a need-based framework. All provincial and regional organisations will be reviewed in terms of efficiency.
• On-the-job training, temporary overseas assignments: Public institutions will be required to hold on-the-job trainings, meetings and similar events at public buildings. Temporary overseas assignments of public personnel will be curbed, additional budgetary allocations for this purpose will be banned.
• Communication: Transition to the electronic correspondence system will be completed, use of the e-notification system will be widened. Printing publications, reports, promotional documents will be prohibited.
• Other current expenses: The government will cut the 2024 budget allocation for representation and promotion expenses by 25%. Public institutions will not be allowed to organise recreational events except for international meetings and national holidays. Unnecessary inventory purchases will be suspended for three years, existing machinery will be banned from scrapping before the end of economic life. Public procurements will be made through the State Supply Office (DMO) where available.

The savings plan envisaged a 10% reduction in this year's budget allocation for goods and services purchases, excluding compulsory and quake-related expenses, Simsek said. Moreover, he announced a 15% cut in this year's budget allocation for investments. The remaining investment budget will prioritise projects with physical progress above 75%, projects in the Feb 2023 quake region, and those to mitigate quake risk elsewhere as well as projects of irrigation, green and digital transformation, and logistics for industrial zones. The government will not accept new public investment projects if not compulsory, Simsek added. The minister also promised a broad review of public spending throughout the year and to terminate ineffective expenditure programmes as of 2025.

Simsek did not provide information about the estimated nominal size of the public savings package. The local media speculated earlier that it was worth TRY 100bn. Speaking before Simsek at the news conference, Vice President Cevdet Yilmaz said that the government aims to keep the central government budget deficit at around or below last year's level as a ratio of GDP. The budget deficit accounted for 5.2% of GDP in 2023. The original budget plan for this year outlined a deficit forecast of TRY 2,652bn, accounting for 6.4% of the GDP estimate in the mid-term economic plan.