“His lyre did not have seven strings, it had one; and having played on that one string so long, the public allowed him no other alternative but to hang himself with it, or to hold his tongue” wrote Balzac in Modeste Mignon (1844). The 2020 budget emphatically announced by Turkey’s Minister of Finance Berat Albayrak dreadfully resembles Balzac’s depiction. While the government insists on playing the horrible melody, that one strings is dragging the Turkish economy into the ground.

The budget draft suggests the government is once again placing its bets on the global conjuncture. This perilous strategy is reflected in the recent statements of Naci Ağbal, who heads the Presidency Strategy and Budget: “the upward trend in global production as well as falling global interest rates are positive developments for the 2020 budget.

Ağbal is referring to a report from the IMF – an institution some opposition officials have met with and were subsequently declared traitors. Yet the IMF has also suggested less positive trends. “Due to trade disputes, a 700-billion dollar global meltdown will occur. There is a strong possibility of a synchronized slowdown in 90 percent of the world’s economies” stated the newly appointed IMF President Kristalina Georgieva. She stressed the recession would leave the 19-trillion debt of the global private sector in delinquency – in what would be the highest amount seen in history.

So what does a budget exceeding 1 trillion lira presage in a period of rising uncertainty? The calculations were based on 5 percent growth.

Though all economic tools were used – including political blackmail – banks did not open their credit channels. And it seems unlikely they will.

Even if there was credit, how many firms would have the strength to take a loan and invest? In the first eight months of 2019, the private sector paid off almost 17 billion dollars of debt. Rather than enthusiasm for investment, companies are worried by equity capital losses.

With regards to the country’s banks, the loan/deposit ratio is around 115 percent. While the banks reduced the number of credits they granted after the currency shock in August, the amount of the credits is higher than that of their deposits. Moreover, Turkish banks paid off 30 billion dollars of external debt within a year. And they owe nearly 100 billion lira in obligations due to their domestic borrowing.

In short, the real and banking does not augur anything promising.

With presidential elections scheduled for 2023 and local elections in 2024, the government will have to draw on the public sector with all its might to turn the economy around. If the state has already undertaken that task to some extent, it will have to save companies by socializing private debts. It will also have to increase public investment and consumption to kick-start growth and satisfy the voter with social transfers. This is omitting the state’s unabated desire to distribute tenders to pro-government companies as well as its projection to increase vehicle purchases by 40 percent in 2020.

The government began to restructure the credit of indebted companies last week. Meanwhile, the number and monetary limits were lifted for 20 different services including Electronic Fund Transfers and balances inquiry. This was no less than an invitation for banks to plunder the people as much as possible.

In 2018, the companies made 37 billion lira with a 32 percent increase in one year. Their earnings then soared by 50 percent at the start of 2019 and reached 24 billion lira within the first six months. In contrast the next profit of banks currently stands at 24.7 billion lira.

The state directly intervenes to socialize private debt. For instance, the government’s Wealth Fund took out 1 billion euros in debt to save three building contractors including Ali Ağaoğlu. The government plans to borrow more to save more companies in the first half of 2020. It seems like the energy sector is next.

The construction of highways, bridges, city hospitals remain as guarantees with regards to the public budget. The budget will also have to take into account the passenger guarantee payments at Istanbul airport that will soon be introduced. Thus, it is no exaggeration to predict the budget deficit in 2020 to reach 138.9 billion liras, thereby rising by 70% percent.

With regards to tax revenue, the current amount is 784.6 billion lira. On average, an increase of 15 percent is expected in every tax category. Rather than on producers, the government is banking on drinkers. The total amount related to the Special Consumption (ÖTV) and Added Value (KDV) Taxes collected from alcoholic beverages and tobacco within the first 9 months of 2018 amounted to 67.4 billion lira. The amount collected by the corporate tax, which concerns 837,278 registered taxpayers, was 55.4 billion lira. Since the amount related to corporate tax won’t differ much and that expected from the Special Consumption (ÖTV) is 176 billion lira, that from alcohol and tobacco being 83 billion lira, tax expectations portend a strong markup for next year. Yet this is not sufficient. The impending danger is internal debt.

Turkey’s 1994 financial crisis was triggered by the financing of the budget deficit through internal debt. When the interest rates were raised, foreign debt served to finance internal debt, related to banking but also the public sector. The economic meltdown in 2001 partly affected the public sector but was mostly a banking crisis. As for the recent meltdown in 2018, a foreign currency shock raised much debt in the private sector. On that account, the government’s recent growth plan, based on the the socializing of private sector debt, could lead to a public finance crisis.

As of August, internal debt had reached 92 billion lira. Half of this, around 300 billion lira will be paid off in 2020. The state will pay on average 28 billion lira worth of internal debt every month. This is double the amount of 2018 and about 50 percent more than the 2019 average. We should add that according to treasury data, the due date of internal debt has come down from 70 months to 30 months.

This of course is the situation without considering interest rates. Deficits related to interest rates will also increase internal debt. Whether due to interim payments in public tenders, guaranteed projects, social security – which received a 150 billion lira transfer in 2019 and runs a deficit of over 21 billion – or the debts of local administrations and military operations, there are many reasons to further raise the deficit. Banks which are being pressured with loans today are likely to be pressured by internal debt next year.

Ironically, alcohol, tobacco and interest are forbidden by religion in the eyes of the government. Yet the fate of the 2020 budget is based on those two categories. Berat Albayrak’s one-string lyre melody is growing more piercing every year. 2019 was worse than 2018. 2020 will be worse than 2019. And so on.