Turkish government to present extra budget as lira dives - officials

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A large print of a Turkish lira banknote is pictured at an exchange currency shop in the opposition-held city of Idlib, Syria, December 5, 2021. Picture taken December 5, 2021. REUTERS/Khalil Ashawi

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ANKARA, Dec 14 (Reuters) - The Turkish government is soon expected to present to parliament an additional budget for next year, two officials said, because a sharp lira selloff has strained the existing budget with pending wage hikes and other new expenditures.

The move comes after the lira lost around half its value against the dollar this year, sharply eroding Turks' earnings, and with the main 2022 budget in the final stages of being debated and approved in parliament.

The officials said the additional budget is expected to take into account a minimum wage hike, and raises in civil servants' salaries and pension payments, as well other measures to support businesses hit by the lira slide and surging inflation.

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"The current budget is tight and an expansion should be made due to the outbreak and developments in the economy... The government is working on an additional budget draft to include extra spending," a senior official said.

President Tayyip Erdogan faces tough elections no later than mid-2023 and his approval ratings have been hit by inflation, with staples such as food and gas recently jumping.

Turkey's public finances are strong compared to emerging market peers, leaving it room for potential fiscal stimulus. The budget deficit has dipped to 1.5% of GDP this year, and is projected to be about 3.5% for this year and next.

Turkey's budget deficit to gross domestic product (GDP) hovered near 1% until 2016. Turkey's public finances are seen to be a key strength supporting the economy.

The officials also said the extra budget would be presented once debate on the main one has been completed in parliament, which is expected this week. The Treasury declined to comment on the issue.

"There is a room to increase budget deficit to GDP to 5%. This room will be utilized. Important changes will be made according to the developments in the economy. This budget is not enough when public workers' wages, minimum wage increase, other support are taken into account," the second senior official familiar with the plan said.

Last month, sources told Reuters the government is preparing to boost wages and cut taxes to support lower-income households that are battling high inflation to tap the country's relatively strong budget. read more

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Additional reporting by Nevzat Devranoglu; Writing by Ezgi Erkoyun; Editing by Daren Butler, Giles Elgood and Ed Osmond

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