Turkiye Cumhuriyet Merkez Bankasi (TCMB) officials discussed an accounting tweak that could boost a dividend payment to the government and help cover the budget deficit, reported Bloomberg.
The change would allow TCMB to book as income unrealized gains and losses in its so-called revaluation account—accrued due to changes in the market value of its foreign-currency and gold holdings. The central bank distributes a share of its profits to the Treasury, its largest shareholder, every year.
Currently it is unclear how advanced the talks are or whether they would result in a policy change. The Turkish central bank reported TRL 61.4 billion ($10.5 billion) in its revaluation account as of 21 October 2019.
The accounting change would require legislative approval. The current law stipulates that gains and losses accrued due to changes in the value of the Turkish lira and the price of gold ‘shall not be included in the profit of the valuation period and not be recognised as income’.
In the first quarter alone, the Treasury plans to redeem about TRL 75 billion of local-currency debt, a record figure for the period in data going back to 2005.
So far this year, the central bank has transferred around TRL 80 billion to the Treasury through a regular dividend payment and a one-off cash transfer.
The fiscal stress follows an economic downturn last year that hit tax revenue and a spending spree after back-to-back elections. Turkey’s budget gap stood at TRL 85.8 billion through September 2019, a 51 per cent increase compared to the same period in 2018.