Prepared by Rakia Moalla-Fetini.
Financial public institutions (four money deposit banks and three investment and development banks) are not formally part of the consolidated public sector in the IMF definition. However, the losses run by the two main public banks—stemming from quasi-fiscal operations that they are performing on behalf of the government—are included in the consolidated public sector account, as discussed in this chapter.
There are 80 provinces, 15 large metropolitan municipalities, and 2,827 smaller municipalities.
In early 1999, new two-year contracts were renegotiated with public sector workers, providing for an up-front increase of 39 percent plus three consecutive six monthly adjustments equal for the past six month CPI inflation times 1.05. Due to these contracts, public sector worker wages are expected to increase by more than 20 percent in real terms in 1999.
As part of the austerity measures taken in 1988, a clawback provision on the funds’ revenues was introduced, whereby the funds had to transfer a share of their earmarked tax revenues to the central budget. This measure had constrained somewhat the profligacy of funds—as they did not have the ability to borrow other than to finance capital spending—but it did not achieve a major improvement, in the absence of any centralized control on their operations.
These funds include the insurance fund for time deposits, the capital market board fund, the insurance inspection board fund, and the highway traffic insurance fund.
These are the mass housing fund, the public participation fund, the price stabilization fund, the revenue administration improvement fund, the support and price stabilization fund, the resource utilization and support fund, the oil exploration fund, and the fuel price stabilization fund.
Two adjustments are made to the authorities’ measurement of the primary balance of the extrabudgetary funds. Net lending by the mass housing fund is considered as an expenditure, while in the authorities’ presentation it is treated as a financing item. Repayments of loans extended by the price stabilization and support fund are treated as a negative expenditure item, while in the authorities’ definition they are treated as a financing item.
In addition to transfers from the budget in the form of equity, compensation for duty losses, and aid, the SEEs receive other subsidies and transfers such as those from the support and price stabilization fund to fertilizer producers and transfers from the development and support fund to the electricity company. Other mechanisms of financing SEE deficits were tax arrears and unpaid dividends, and unpaid premia to the social security institutions.
The same wage contracts as those covering public sector workers in local administrations cover workers in state economic enterprises.
In Table 67, the primary balance of the SEEs, as shown in the authorities’ presentation, is adjusted downward by the amount of interest receipts and upward in the last three years by interest charges paid by soil products office (TMO) and which have not been classified as such in the consolidated accounts of the SEEs. These interest charges have become quite significant given the large stocks of grain that TMO has accumulated in the last few years.
Chronic liquidity pressures have been addressed from time to time through capital injections and minor payments of the duty losses by the treasury.
Ziräat Bank alone had 20 percent of the commercial lending market as opposed to 7 percent now.
Formally, Halk Bank’s additional flow of unpaid duty losses is supposed to be calculated as interest income on the stock of unpaid duty losses at “commercial rates,” while that for Ziräat Bank was supposed to be calculated based on Ziräat “cost of funds.”
The dip in real ex post interest rate in 1997 is in part due to a lengthening of maturity.
The exceptionally high real interest rate of 25 percent in 1999 is excluded from the calculation of the average real interest rate.
In what follows, domestic and foreign debt is aggregated and k refers to the ratio of domestic and foreign debt to GNP. This abstracts from the effects of a real appreciation (which lower the foreign debt to GNP ratio) since only a modest real appreciation can be sustained over time. See Chapter V.
To apply this formula on actual data requires converting discrete time growth rates-in this case annual growth rate- to continuous time growth. The relationship between both is as follow: In (1 + gd) = gc, where gd and gc are respectively discrete and continuous time growth rates. For example, an annual growth rate of 10 percent translates into a continuous growth rate of 9.5 percent.