Turkey’s Treasury Faces Mounting Cash Deficit and Borrowing Pressures, Says TEPAV Advisor

Turkey’s Treasury is facing increasing strain on its cash position, with signs of deepening fiscal challenges emerging in early 2025. According to Hakan Yılmaz, Program Advisor at the Economic Policy Research Foundation of Turkey (TEPAV), the Treasury’s cash deficit surged by 49.4% in the first two months of the year, reaching 602.6 billion Turkish lira (TRY).

Yılmaz noted that since late March, the Treasury has started to tighten cash management by selectively releasing funds to public agencies, primarily for tax and Social Security Institution (SSI) premium obligations.

“Additional tightening measures seem inevitable in the coming days,” Yılmaz said, underscoring the growing urgency of the situation.

Cash Deficit Surpasses Budget Deficit, Raising Red Flags

The study draws attention to the widening gap between Turkey’s budget balance and cash balance, a divergence that has persisted in recent years. As of February 2025, the cash deficit exceeded the cumulative budget deficit by 34.1%, a significant increase compared to the same period last year.

Earthquake Costs and Public Investments Weigh Heavily

According to the analysis, several factors are compounding the pressure on the Treasury's cash position:

• Continued strain from earthquake-related appropriations, totaling TRY 1.15 trillion

• Unaccrued public investment expenditures, especially in DSİ (State Hydraulic Works) and the General Directorate of Highways

• Rising SEE (State Economic Enterprises) duty losses

• Mounting current transfers, particularly to the SSI

• Ongoing declines in budget revenue performance

The report warns that these combined pressures could intensify the cash shortfall in the months ahead.

Borrowing Exceeds Targets by 78% in First Quarter

Yılmaz also highlighted a significant deviation in the Treasury’s borrowing performance for the January–March 2025 period. The net borrowing plan of TRY 239 billion was exceeded by 78.5%, reaching TRY 427 billion.

This deviation was largely driven by foreign currency-denominated borrowing, which increased the Treasury’s exposure to exchange rate risks. The planned external debt repayment of TRY 114 billion was instead rolled over, bringing the payment down to TRY 16 billion.

“Contrary to the program’s initial framework, the Treasury took on additional market risk through external borrowing,” the report stated.

Additionally, non-borrowing resource utilization, particularly from the Treasury’s Cash/Bank accounts, exceeded targets by 297%, while Treasury deposits began to decline sharply.

Overall, financing needs for the first two months reached TRY 603 billion, more than double the programmed figure of TRY 284 billion—a deviation of 112%.

Liquidity Risks Expected to Escalate in Second Half of 2025

The study warns that as political and economic uncertainties mount, including fallout from recent events such as the arrest of Istanbul Mayor Ekrem İmamoğlu, it may become increasingly difficult for the government to meet its 2025 budget targets.

“The cash deficit is already exceeding projections, and confidence in the economic program is waning. As we move into the second half of the year, the Treasury may be forced to borrow more aggressively amid rising market risks and liquidity constraints, resulting in higher financing costs,” the report cautioned.