The impact of recent tax hikes by the government on Sunday added about 6 liras (nearly $0.25) to the final pump price in Turkey, up more than 20% a litre.
Consumer tax on gasoline and diesel oil was raised to help to fund a 1.12 trillion lira ($42.2 billion) increase to the 2023 budget after the May elections sent government spending soaring.
The tax rate for gasoline was increased to 7.52 lira per litre from 2.52 lira ($0.1), while tax on diesel oil rose to 7.05 lira from 2.05 lira.
The consumer tax on natural gas was also raised later in the day by a rate of 224%.
The tax hikes will help with a budget deficit that jumped to 263.6 billion lira (over $10 billion) in the first five months of the year, up from 124.6 billion lira a year earlier, but it could also stoke inflation that had declined to 38.21%, according to controversial official figures, in June from a 24-year high of 85.51% last October.
The wider deficit was largely because of increased spending ahead of May elections, when President Recep Tayyip Erdogan was elected for a third term, as well as on rebuilding work after the devastating earthquakes on 6 February, which may cost Turkey more than $100 billion.
The 1.12 trillion lira boost to Ankara’s budget was approved by parliament on Saturday and follows various other recent tax increases among efforts to bolster government coffers, including increases to VAT.
The lira has lost more than 80% of its value against the dollar since 2018, when the transition to the presidency system was launched after Erdogan’s election for a new term, and has shed more than 28% in 2023, pushing up prices of a broad range of goods from fuel to food in the import-dependent country.