Turkish Finance Minister's promise of 'fiscal discipline' draws ire from opposition, experts

As the recently appointed Finance Minister Lütfi Elvan and his team try to lure in foreign investment with promises of reform and fiscal discipline, economists and the opposition call on President Erdoğan and his government to set an example for the people by cutting down on their lavish spending.

Thursday January 21 2021 10:00 am

Turkey's Presidential Palace.

K. Murat Yıldız / Duvar English

Following the resignation of Finance Minister Berat Albayrak and the appointment of a new raft of monetary policymakers, the gradual deportation of unorthodox financial practices and promises of a new economic era in Turkey continues.

This time the promises came from Lütfi Elvan, a long-time Erdoğan ally and former deputy prime minister who replaced Albayrak as finance minister.

Earlier this week in a series of tweets, Minister Elvan addressed several economic issues emphasizing that Turkey's new public finance policies will be in line with its anti-inflation policies and that they will apply strict fiscal discipline as much as pandemic conditions allow.

However, Elvan’s statements did not convince everyone, especially after it became public that the government will spend at least another 100 million dollars on President Erdoğan's three residences in 2021.

The state wants people to sacrifice

“The discipline they are referring to is, as always, from the poor. When the government is talking about discipline and tightening expenditures it means they are going to ask the people to make sacrifices,” main opposition Republican People's Party (CHP) MP and former chief inspector of the treasury M. Akif Hamzaçebi told Duvar English.

“The minister might have made a statement about monetary discipline and have talked about dedication to quelling inflation, but it is the government, ministers, president, and the palace who have to cut down on their extravagant expenditures first. The rest is just cheap talk.”

Return the officials cars

Hamzaçebi suggested several ways the government could cut back on such expenditures saying, “They should first stop signing special agreements with companies, they should stop leasing buildings with above-market rents, and they should sell all official cars.”

“If they want to tame inflation and stabilize the economy they should not only follow market rules, but they should set an example for the people by spending state funds accordingly and returning all of their official cars,” he continued.

Turkey’s economy is sick

Pointing at the promises for reform and a new economic era Hamzaçebi noted that that “the recent statements and decisions such as the hike in interest rates by the new economy team have only lowered the fever of the patient. They didn’t cure the disease. They just attracted a few new foreign investors and some money to save the day.”

“55 percent of the total deposits in our banks are in foreign currency. The president continuously calls on the people to invest in the lira. Interestingly enough, before the president started making these calls, only around 25 percent of people had their savings in dollars or euros. No one trusts the state’s economic policies. Therefore, they invest in foreign currencies,” he said.

Stop the spending spree

Hamzaçebi concluded by saying, “The government has to put the breaks on spending. At the beginning of their rule, they were able to bring in money from abroad. This is no longer the case. In order to run the engine, they need to take action.”

“We have not seen any austerity measures from the president or his government since they came to power. Turkey needs to use its limited resources in a logical and effective way. I am happy to hear the minister talking this way. They used to say spending was necessary for the ‘reputation’ of the state, now we hope they realize that this is not the case,” columnist, author, and former Nationalist Movement Party (MHP) MP Prof. Dr. Özcan Yeniçeri told Duvar English.

The truth is hidden in government tenders

Yeniçeri pointed out where some of the flaws in the government's economic strategy lay, saying, “People should look at government tenders and contracts for big projects. The truth is hidden there.”

“When I was an MP, Mr. Davutoğlu became the foreign minister and the government leased a residence for him and his family for an enormous amount of money because the official residence was occupied at that time by President Gül, which is another story. I held a press conference in front of the residence and the journalists who attended were detained and accused on terrorism charges the same day,” Yeniçeri recalled.

“During my time in parliament, I gave nearly 10,000 parliamentary questions, of which a large number was about this illegal, illogical, and unethical spending. There were buildings the government leased which they could have owned with the amount of money they paid for rent or even build them from scratch,” he continued.

“Unfortunately I failed”

“They have been wasting people’s money like there are no repercussions. They bought and leased luxury cars, planes, and lavish buildings. I fought against this for years, but unfortunately, I failed,” Yeniçeri said in a disappointed tone.

“Turkey needs to save money and the people leading the country should set an example. You cannot ask your people to save on bread while you enjoy such a high living. The rulers of this country want only the ordinary people to sacrifice. This is not fair.”

“Recently, a citizen told the president that he has trouble providing even bread for his family. We saw it on TV. The president accused the citizen of exaggerating his situation. This shows that the president and his government have lost touch with reality. This is the beginning of the end,” Yeniçeri concluded.

The budget deficit is out of control

Meanwhile, many economists and opposition politicians criticized Elvan for his statements about the budget deficit.

“They revised the official budget deficit using the pandemic as an excuse. It is funny that today they are bragging about losing less money than projected after the revision. For anyone interested, the numbers are still out there. The budget deficit is out of control and they are trying to do something about it,” economist Cüneyt Akman told Duvar English.

They have to do it

“They will try to apply strict fiscal discipline not because they want to, but because they have to; at least for several months in order to ‘lure in’ foreign investment. If it works it may continue. If not, we will see.”

As far as why the government has to apply fiscal discipline, Akman said that “the budget deficit increased enormously, which resulted in high inflation and a foreign currency shock. In order to cure the negative effects of this shock and avoid a new one, they need foreign investment. To achieve this, they need to create trust abroad, so this what this talk is all about.”

Akman concluded by saying, “On a scale from 1 to 10 I would say I trust Minister Elvan’s words on fiscal discipline at a 6, given the current conditions. They will probably try it for 3 to 5 months. If as much foreign cash flows in as they are hoping, it might last longer.”