Borrowing and ‘drawer’ in debt management

Borrowing and ‘drawer’ in debt management


Many regulations have been made over the 696-numbered statutory decree issued on Dec. 24. These regulations have again nothing to do with issues that have led to the declaration of the state of emergency in Turkey. And a couple of these regulations are related to the economy.

And the most striking issue is hidden in three regulations: One is the issuance of government bonds by the Treasury bypassing budget and borrowing law; the second one guarantees the transfer and on-lending of foreign debts to the Turkey Wealth Fund (TVF) or the companies and sub-funds to be established by this Fund or provides a Treasury guarantee regarding this issue; and the third makes it possible for special-budgeted institutions, including Defense Industry Fund, to undertake foreign borrowing without the approval of the Treasury.

All of these three are steps that deactivate the Turkish Parliament’s authority and sovereignty in spending, tax collection, and ultimately borrowing. In summary, they are steps that deactivate the concept of “national will,” which politicians like to speak about while they hold power.

Most importantly, among these astonishing regulations taken in the area of economy comes the issuance of specially-designed government bonds to cover the payments for the transfer of Vakifbank to the Treasury and this “not being regarded as debt.”

The Treasury will give lease certificates instead of providing payment for the purchase of shares belonging to various foundations at Vakifbank, but this will “not be included in the borrowing in the net debt account,” meaning debt certificates will be issued but this will “not be regarded as borrowing.”

In the same way, the Treasury will issue and provide specially-designed bonds for the transfer of shares belonging to the foundation of Vakifbank employees, but the prerequisite of “allocation of fund from the budget” sought in the law will not be required with this statutory decree and these bonds will not be “regarded as borrowing.”

Why are these being done?

To stay out of the borrowing limit set in the Public Finance and Debt Management Law, to transgress the condition of allocation of fund from the budget, that is to say to deactivate the parliament’s “budget right” and have it “passed over.”

We know that this has nothing to do with the state of emergency, so what kind of an emergency situation is there for the payment for the transfer of Vakifbank to the Treasury to be covered with the bonds to be issued and this not “being regarded as borrowing” to be regulated with a statutory decree? What we know is, no, there is no such emergency situation.

The Treasury will make a payment: It will do so through a non-cash transaction, meaning it will do so through debt certificates “written” by itself and these bonds will not “go down as debt.” While putting down bank shares under its assets, it will hide the debt it has undertaken “in the drawer.” From whom? The parliament’s sovereignty and the rule in the law. When I first read this issue, I thought it was a joke. This could be at best be valid in the “world of ostriches,” when the budget and bill book of the state is being riddled, what happens if you put forward a decree with a statutory decree that says “consider as this did not happen?” The markets would then think of this as negative.

If there was an experienced senior bureaucracy in the Treasury in the capital Ankara, they would tell the politicians that this should not happen this way and talk about the damage it would bring. A former Treasury says this issue, with even the wording of the relevant article being bad, shows the current senior bureaucrats do not “have the capacity of assessment and evaluation capacity.” Well, we have found out the other day that a senior bureaucrat in the Treasury was worried about which of his relatives he was to place in the state positions.

This statutory decree has paved the way for the transfer of money from the Turkey Wealth Fund to the Treasury. When the Wealth Fund was founded with big claims, the first question that was asked was: “What could it do that the Treasury cannot?” As we cannot see the difference, it is now obvious that the Wealth Fund will become a partner with what the Treasury can do. The statutory decree has paved the way for transfer and on-lending of foreign debt as well as Treasury guarantee. Especially, transfer of the foreign debt - undertaken originally by the Treasury under certain circumstances - to the Wealth Fund in longer terms and with lower interest rates (maybe even zero) has now been made possible.