Turkey's budget shortfall approaches $24.5 billion in the first half of the year
In a significant development for Turkey's economy, the central government budget deficit surged to a record TL 2.11 trillion in 2024. This substantial increase is attributed to soaring interest payments, persistent fiscal pressures, and increased government spending outpacing robust revenue growth.
Key factors contributing to this deficit include rising interest expenses, government spending growth, and insufficient revenue growth despite tax hikes. Interest payments amounted to over TL 275 billion in June 2025, accounting for more than 22% of total government spending, significantly deepening the fiscal gap despite strong tax revenue growth. Total budget expenditures increased by 43.1% year-on-year to TL 1.24 trillion in the same month, outpacing revenue increases and contributing to larger deficits.
While tax revenues expanded by 58.3% annually, reaching TL 764.9 billion due to resilient consumption and improved enforcement, this was not enough to offset rising expenditures and interest costs. The government's cash deficit ballooned to TL 455 billion in June 2025 alone, a 116% increase year-on-year, reflecting deep fiscal imbalances and indicating increased borrowing requirements especially during summer months.
To address these fiscal challenges, the government raised taxes in 2025, including hikes in withholding taxes on lira deposits and mutual funds. However, these measures have yet to prevent the deficit from overshooting the Medium-Term Program targets, with the deficit-to-GDP ratio potentially exceeding the 4.0% target for 2025.
It is worth noting that Turkey maintained a budget gap to GDP ratio of around 1% from 2013 to 2016, but it has steadily expanded since then. The primary deficit in June 2025, which excludes interest payments, stood at TL 54.5 billion, significantly lower than the TL 176 billion shortfall recorded in the same month last year.
Over the January-June period of 2025, budget revenues climbed 46.1% annually to reach TL 5.6 trillion. By the end of June 2025, 44.7% of the TL 14.73 trillion total spending allowance projected in the 2025 central government budget has been used.
In 2020, the budget shortfall reached 3.5% of GDP and ended 2021 at 2.8%. The escalating quake-related expenditures in 2023 pushed the deficit to approximately 5.4% of GDP. The government projects a reduction in the budget deficit to around 3% of GDP for 2025 from about 4.9% in 2024.
This article provides a factual account of the central government budget deficit in Turkey and the factors contributing to it, aiming to inform readers about the current state of the country's fiscal position and financial stability.
[1] Central Bank of the Republic of Turkey, Monthly Report, June 2025. [2] Ministry of Treasury and Finance, Monthly Report, June 2025. [3] Ministry of Treasury and Finance, Medium-Term Programme, 2025. [4] International Monetary Fund, Turkey: 2025 Article IV Consultation, July 2025.
- The escalating interest expenses and government spending, coupled with insufficient revenue growth following tax hikes, have contributed to a widening deficit in Turkey's central government budget, affecting both business operations and the overall economy.
- Despite the government's efforts to address fiscal challenges, such as raising taxes in 2025, the deficit continues to overshoot the Medium-Term Program targets, indicating a persistent strain on the finance industry as Turkey seeks to reduce its deficit-to-GDP ratio and achieve financial stability.
