Batman, Turkey: Turkey has no worries financing its current account deficit, and extra measures will be taken if needed to ensure macro stability, Finance Minister Mehmet Simsek said yesterday.

Speaking to Reuters two days after Turkish markets took fright at data showing Turkey recorded a record current account deficit of $9.8 billion (Dh35 billion) in March, Simsek said that excluding energy imports the deficit was likely to "slow down" in the second half of the year.

Analysts have forecast Turkey's current account deficit to top 8 per cent of GDP this year compared with 6.7 per cent in 2010.

"There are no worries regarding the financing of the current account deficit because of trust in this country, stability and positive expectations," Simsek said in an interview in the city of Batman.

Account deficit

"But that doesn't mean the current account deficit is not a problem. We are faced with a current account deficit, which is a very important structural problem. Its solution lies in medium- and long-term multi-dimensional measures," he said.

Simsek, a former investment banker with Merrill Lynch, was visiting his constituency in southeast Turkey to campaign ahead of a parliamentary election set for June 12.

Opinion polls show Prime Minister Tayyip Erdogan's AK Party on course to win a third consecutive term in power, thanks in part to Turkey's economic success over the past decade.

Simsek said Turkey's economic growth was running above forecasts, and the 4.5 per cent target for 2011 was conservative. He also expected foreign direct investment inflows into Turkey to rise this year.

Analysts, however, fear an overheating economy is driving the current account to alarming levels, and have criticised the central bank's policy of keeping interest rates low while relying on hiking banks reserve requirements to achieve an overall monetary tightening.

Simsek said the effects of monetary measures, aimed at stemming credit growth, were strongly evident from the second half of April.

Budgetary success

Turkey showed a budget surplus of more than 1 billion lira in April, and fiscal discipline is being maintained while waiting for monetary measures to bite.

Simsek said the budget deficit for January through April stood at 3.068 billion lira (Dh7.112 billion), compared with a deficit of 15.8 billion lira in the same period last year. Expenditure totalled 22.98 billion lira for the four months, compared with 25.173 billion lira in the same period a year ago.

Turkey posted a primary surplus of around 13.5 billion lira in the January-April period.

The surplus in April was the first recorded for that month since 1988, Simsek said. The improvement in April was due to a combination of lower spending and higher revenues. He also said the budget received 190 million lira in revenues from restructuring of public receivables in April.

Turkey cut its budget deficit to a provisional 3.6 per cent of GDP in 2010 from 5.5 per cent the previous year. It targets a deficit of 2.8 per cent this year.

Its debt-to-GDP ratio fell to 41.6 per cent in 2010, bettering a target of 42.3 per cent, and is targeted at 40.6 per cent of GDP in 2011, according to the mid-term plan.

The government announced a tax debt restructuring scheme late last year to induce tax-payers to pay up.

"There is still interest. The figure reached is very significant and much higher than we had foreseen. This is a great success," Simsek said.

Social security payment

He said pledges of public receivables, including social security payments, had reached 45-46 billion lira.

"So far the Finance Ministry has got over 26 billion lira, and with the social security institution the total figure reached 45-46 billion lira," Simsek said.

A finance ministry official said that this figure corresponds to what taxpayers have pledged to pay, without giving information on the gross figure.

Simsek said the restructuring will lower borrowing needs, help the budget and reduce the debt stock to GDP ratio faster than forecast. Medium-term economic programme targets would be reviewed after the election when results of the restructuring could be seen, he added.

"With restructuring the debt/GDP ratio is going to decline faster-than-forecast. This is going to ensure Turkey's risk premium will remain at relatively low levels and credit rating will head for better ground with fiscal discipline," Simsek said.