Turkey increases fuel tax to pay for bigger budget

• Turkey increased fuel tax to pay for a bigger budget.
• The additional tax on petrol could make things more expensive.
• The lira has lost more than 80% of its value since 2018.

Turkey increased the fuel tax on Sunday to pay for a bigger budget of 1.12 trillion lira ($42.2 billion) after spending a lot of money because of earthquakes in February and an election in May.

The additional tax on petrol will help with a budget gap that grew to 263.6 billion lira in the first five months of the year, from 124.6 billion lira last year, but it could also make things more expensive. Prices went down to 38.21% in June from 85.51% last October, which was the highest in 24 years.

The budget gap was bigger mostly because the government spent more money before the May elections, when President Tayyip Erdogan won again, and also to fix things after the earthquakes in the south of Turkey.

The earthquakes, which killed more than 50,000 people, will cost Turkey more than $100 billion in total.

The government made petrol more expensive by raising the tax to 7.52 lira per litre from 2.52 lira ($0.1) and diesel oil to 7.05 lira from 2.05 lira.

The tax changes, and another tax called VAT, will make petrol cost about 6 liras more at the pump, which is more than 20% more per litre, Reuters says.

The government added 1.12 trillion lira to its budget on Saturday with parliament’s approval and has also made other things more expensive to get more money, like raising VAT by two percentage points.

The lira has lost more than 80% of its value since 2018 and has lost more than 28% in 2023, which makes everything more expensive from petrol to food in Turkey, which buys a lot of things from other countries.

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