Turkey’s Budget Deficit Widens Sharply in June as Fiscal Pressures Persist

Central government records TL 330.2bn deficit in June; cash budget points to even deeper shortfall amid rising interest expenses.

Turkey’s central government budget posted a deficit of TL 330.2 billion in June, up from TL 275.3 billion in the same month last year, according to data released by the Ministry of Treasury and Finance. While revenue growth remained robust on the back of strong tax collections, spending—especially interest expenditures—continued to outpace, deepening the fiscal gap.

Notably, the cash budget for June, announced earlier, showed an even larger deficit of TL 455 billion, suggesting that near-term liquidity conditions remain under pressure and pointing to possible acceleration in borrowing requirements during the summer months.

Revenues up 54%, but interest payments weigh heavily

In June, total budget expenditures rose 43.1% y/y to TL 1.24 trillion, while revenues surged 53.8% y/y to TL 909.4 billion. Tax revenues, the bulk of government income, expanded by 58.3% annually to TL 764.9 billion, reflecting resilient consumption and improved enforcement.

However, interest payments soared to TL 275.7 billion, accounting for over 22% of total spending. Excluding interest, the primary deficit narrowed sharply to TL 54.5 billion, from TL 176 billion in June 2024—an improvement that could offer limited relief to policymakers focused on medium-term fiscal consolidation.

The government spent 8.4% of its total 2025 budget allocation in June alone, slightly above the 7.8% rate recorded a year earlier.

Six-month cumulative deficit nears TL 1 trillion

For the first half of 2025, Turkey’s central government budget recorded a cumulative deficit of TL 980.5 billion, up 31% from TL 747.2 billion in the same period last year. Total expenditures reached TL 6.58 trillion, while revenues came in at TL 5.6 trillion—up 43.7% and 46.1% y/y respectively.

Crucially, the primary balance swung into a TL 131 billion surplus, reversing a TL 172.8 billion deficit in the first half of 2024. This indicates some improvement in underlying fiscal dynamics excluding interest costs, but rising debt servicing expenses—over TL 1.1 trillion year-to-date—remain a growing drag on the budget.

Cash Budget Signals Greater Liquidity Stress

The June cash budget, which tracks actual Treasury inflows and outflows, reported a TL 455 billion deficit—well above the central government’s accrual-based figure. This discrepancy largely stems from timing differences in revenue booking and payment disbursements.

The cash deficit underlines short-term liquidity strains and the continued burden of large interest payments. It also reflects heavy front-loaded spending, particularly on public wages, pensions, and social transfers, which may require heightened domestic borrowing or external financing in the second half of the year.

According to analysts, the divergence between cash and accrual balances is not unusual but highlights the need for caution in interpreting monthly data, especially in periods of elevated volatility in government funding needs.

Outlook: Fiscal Targets at Risk Amid Weak Discipline

Although the government has so far managed to avoid slippage in its 2025 primary balance targets, Finance Minister Mehmet Simsek has already admitted during his recent London visit that the overall budget deficit may exceed the official 3.1% of GDP target due to weaker-than-expected revenue performance.

Most economists now forecast the full-year deficit could rise above 4% of GDP unless significant fiscal tightening is implemented in H2. With elections on the horizon and geopolitical risks remaining elevated, the pressure on Turkey’s budget is likely to persist—keeping investor focus firmly on both revenue mobilization efforts and spending discipline.