2023-07-16 12:09:32
The fuel tax increase will contribute to efforts to bridge the budget deficit in Turkey, which jumped to 263.6 billion liras in the first five months of this year.
Turkey’s increased deficit is largely due to increased spending ahead of the May elections
Turkey raised a tax on gasoline on Sunday to help fund a 1.12 trillion lira ($42.2 billion) increase in its budget in 2023 following earthquakes in February and presidential elections in May boosted spending.
The fuel tax increase will contribute to efforts to bridge the budget deficit, which jumped to 263.6 billion pounds in the first five months of the year, up from 124.6 billion pounds in the previous year.
But it may also stoke inflation, which fell to 38.21 percent in June from a 24-year high of 85.51 percent recorded last October.
The increase in the deficit is largely due to increased spending ahead of the May elections, in which President Recep Tayyip Erdogan was elected to a third term, as well as to reconstruction work following earthquakes in southern Turkey.
Forecasts indicate that the total cost resulting from the impact of the earthquakes, which have claimed more than 50,000 lives, will exceed $100 billion in Turkey.
In the latest step towards increasing the cash reserves of the treasury, the tax rate on gasoline increased from 2.52 Turkish liras ($0.1) per liter to 7.52 liras, while the tax on diesel oil rose from 2.05 liras to 7.05 liras.
The impact of these tax adjustments, along with the value-added tax, is expected to add nearly 6 liras to the final price, an increase of more than 20 percent per liter, according to Archyde.com calculations.
On Saturday, parliament approved the 1.12 trillion lira increase for Ankara’s budget, following various other recent tax increases in efforts to shore up government coffers, including a two-percentage-point increase in value-added tax.
The lira has lost more than 80 percent of its value since 2018, and has fallen by more than 28 percent since the beginning of 2023, which has raised the prices of a wide range of commodities, including fuel and food, in the import-dependent country.
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