TURKEY yesterday pledged a hefty loan of $135 million, aimed partially at helping the north bridge its growing budget deficit.
The loan may have come not a moment too soon for the north, amid rumours that the authorities might not be able to deliver pay cheques to public employees at the end of the month.
A protocol leading to the handing over of the loan package was signed yesterday by Turkish Cypriot ‘prime minister’ Ferdi Sabit Soyer and ‘finance minister’ Ahmet Uzun, who were in Ankara for meetings with Turkish Prime Minister Tayyip Erdogan and Foreign Minister Abdullah Gul.
Such handouts from the Turkish government are far from unusual. Last year, Turkey provided $100 million to the north to cover its budget deficit – a loan separate from the hundreds of millions of dollars Turkey gives to keep up development of the breakaway state’s relatively primitive infrastructure.
But Soyer and Uzun were at pains to convince observers they had not gone cap in hand to Turkey in search of cash.
“The visit should not be seen as an appeal for aid. Our aim is to use credit from Turkey to develop the infrastructure, rather than using it to balance the budget. We foresee using our own sources for the budget,” Soyer said after meetings in Ankara prior to the signing of the protocol.
Uzun was also adamant that the budget deficit could be bridged using local resources, rather than through Turkish handouts. He conceded, however, that the deficit had grown so large the ‘government’ could face difficulties in honouring pay rises given to public employees at the beginning of the year. But the major reason for the deficit, he said, was the recent slump in the value of the New Turkish Lira (YTL).
Uzun said the overall budget deficit was in the region of 80 to 100 million YTL ($53-66 million), of which around 30 million YTL ($20 million) came as a result of pay rises. A further 50 million YTL ($33 million) was blamed on the drop in the value of the YTL.
Uzun expressed hope yesterday that the deficit could be filled by funds raised through taxation. However, with 60 per cent of financial transactions in the north being conducted off the record, experts wonder how Uzun plans to make ends meet. The sale of semi state-owned mobile phone service provider TELSIM later this year, Uzun hoped, would also provide much-needed funds. However, his optimism could come as a response to growing sentiments in Turkey that north Cyprus needs to be more financially self-sufficient.
Former head of the Chamber of Commerce Ali Erel said, however, he believed Soyer and Uzun’s visit to Ankara had come at a critical time, and that the main aim had been to secure cash to pay off public employees.
“I believe the government was completely out of funds and that if they had not this, they would not have been able to pay wages at the end of the month.”
