Skip to content

New savings package should ensure continued delivery of public services, experts suggest

New savings package should ensure continued delivery of public services, experts suggest
By Dr. Ersin Sunbul and Murat Ozsoy
May 13, 2024 3:26 PM

Türkiye has unveiled a new savings plan to redefine public spending and enhance efficiency. The plan, announced on Monday, will prioritize essential state investment projects while curbing unnecessary expenditures. 

Simsek outlined three fundamental pillars of expenditure measures:

Firstly, savings in the public sector; secondly, discipline in budget expenditures; and thirdly, efficiency in public investments.

He specified eight main areas of public savings, including vehicles, buildings, public employment, administrative efficiency, overseas temporary assignments, energy and waste management, communication expenses and other current expenditures.

Saving package for public expenditure

Simsek emphasized that the new austerity measures aimed at tackling inflation and promoting financial discipline, to achieve single-digit inflation rates. The plan includes:

  • Suspending the purchase and leasing of new vehicles for three years.
  • Pausing the acquisition of new properties, except for buildings deemed earthquake-prone, for three years.
  • Restricting the hiring of new personnel in the public sector to match the number of retirees for the next three years.
  • Public institutions will not purchase fixtures for three years.
  • Temporarily stopping non-essential shuttle services for personnel in areas with available public transport.
  • Imposing a ceiling limit on management board salaries for public employees.
  • Transitioning public buildings to renewable energy sources for lighting to save energy, and favoring electronic communication for official correspondence.

Tükiye Today asked experts to opine on the initiative aimed at providing a new public expenditure outlook.

“The package is crucial for stabilizing and fostering economic growth”, Dr. Sunbul says

The first expert, Dr. Ersin Sunbul emphasized the importance of Treasury and Finance Minister Mehmet Simsek’s announcement regarding a savings package for public expenditures, saying that his actions promoting savings and efficiency are crucial for stabilizing and fostering economic growth.

Dr. Ersin SÜNBÜL,ANKASAM | Ankara Center for Crisis and Policy Studies

Sunbul has served in the Turkish Armed Forces for 27 years. Following his undergraduate degree in business administration, Sunbul obtained his master’s degree from Ankara Yildirim Beyazit University and his doctorate in international trade from Ankara Haci Bayram Veli University. He is currently pursuing a second doctorate in the Department of Business Administration at Kirikkale University’s Institute of Social Sciences.

Global factors, including the COVID-19 pandemic, high inflation, exchange rate fluctuations and political uncertainties, have contributed to economic slowdown and rising unemployment rates in Türkiye. 

Despite challenges such as natural disasters, Türkiye’s low-interest rate policy has helped mitigate unemployment and the economic slowdown compared to other countries. The Minister of Treasury and Finance has implemented measures to transition from a political economy to a real economy, but these have not yielded the desired results over time. 

The savings package aims to proactively address economic challenges, potentially involving reviewing public expenditures, tax policy changes, and business incentives. Possible policy tools include adjustments to interest rates, reserve requirements, open market operations, tax policy changes and public spending adjustments. 

Savings and efficiency policies require action from both the government and individuals/businesses, focusing on improving resource utilization and budget performance. 

Past economic crises have seen savings predominantly affect household budgets, leading to high interest rates on consumer loans and inflation. Due to economic conditions, businesses also face challenges in accessing finance. 

It’s suggested that the upcoming package will likely target the public sector, but measures should be balanced to ensure continued delivery of public services and support economic growth. 

Expert Ozsoy questions the package’s efficiency

After Minister Simsek’s announcement, Murat Ozsoy, the second expert, raised doubts about the package’s efficiency, highlighting that implementing measures and their impact on the economy and people’s finances will become apparent.

New savings package should ensure continued delivery of public services, experts suggestOzsoy graduated from the English Economics Department of Istanbul University’s Faculty of Economics. After completing his master’s in Business Administration at Istanbul Bilgi University, he pursued four years of training in the Leadership Faculty of Sabanci University’s Executive Development Department. Over his 12-year banking career, he held managerial positions at Türkiye İs Bankası and Finansbank.

In 2017, he established Biz Finansal Danismanlik ve Tic. A.S., providing financial consulting services.

The government’s announcement of the savings package was important for two main reasons. First, it signaled the monetary policy’s efforts to combat inflation and the steps the public finance policy took to achieve coordination between both policies. Second, while expecting savings from the public, the government needed to demonstrate a pioneering attitude.

Ozsoy was expecting answers to the following questions before today’s announcement regarding these two crucial points:

  • In which areas will savings be made?
  • Within what timeframe will these savings contribute to the government budget, and how much will they amount to?
  • What percentage of contribution to lowering inflation is expected from this package?

Frankly, we did not receive specific answers to these questions. There was a rough mention of a contribution of ₺100 billion. Considering that the budget revenues announced for 2024 are ₺11 trillion and the budget expenditures are ₺8.04 trillion, with an expected budget deficit of ₺2.6 trillion for this year, Ozsoy finds the content of today’s savings package weak compared to this budget deficit.

Moreover, after implementation, it will take time to see the direct effects of the measures mentioned in the package. The impact of these decisions on the general economy and the financial lives of the common public will not be immediately noticeable.

For this savings package to show prominent results, Ozsoy suggested economic management.

It would be beneficial if the government regularly reports on how much savings have been made in the public sector on a monthly or quarterly basis, and how these savings have been used as a support mechanism, especially in areas where the low-income segment is in need. If such a method is followed and the low-income citizens feel the steps taken under this package, the policy would have achieved its goal.

Last Updated:  Jun 8, 2024 12:26 PM