Macro and Politics

* The Treasury and Finance Ministry will release March central government budget figures @ 11:00 local time. The Treasury cash balance posted a deficit of TL279.6bn in March, while the primary balance recorded a shortfall of TL48.9bn. This brought the cumulative cash deficit to TL618.3bn in the first three months of the year. Treasury cash balance figures serve as a leading indicator for the central government budget balance, which is scheduled to be released on April 15. The available tax adjustment space under the échelle mobile mechanism, introduced in early March, has narrowed markedly. Within this framework, the entirety of the fuel price increases observed throughout March was absorbed through foregone tax revenues, effectively preventing these increases from being passed through to retail prices. If the mechanism were to absorb the entire remaining tax margin—corresponding to SCT ceilings of TL13.9 per liter for diesel and TL14.82 per liter for gasoline—we estimate that the daily fiscal cost of the scheme could reach approximately TL1.4bn, including the VAT effect. While the échelle mobile system helps contain the short-term inflationary pass-through of fuel price increases, a persistent energy shock would likely weigh on SCT revenues and therefore pose downside risks to the cash balance. Under the current policy framework, we expect the budget deficit to widen materially beyond our previous forecast of TL2.8tn (3.4% of GDP), reaching around TL3.3tn (4% of GDP) by end-2026.

* The Treasury sold TL71.2bn at the direct sale of 1y USD-denominated bond, TL48.2bn at the direct sale of 2y gold-denominated bond and TL74.2bn at the direct sale of 2y gold-denominated lease certificate yesterday, bringing total borrowing from these sales to TL193.6bn. Accordingly, the Treasury’s total domestic borrowing since the beginning of the month has reached TL351.3bn. Following today’s direct sales, the Treasury will hold 2y and 5y fixed coupon bond auctions on April 21 and finalize its domestic borrowing program for the month. According to the domestic borrowing strategy for the 3-month period covering April – June 2026, the Treasury plans to conduct TL480.1bn in domestic borrowing against TL505.4bn in redemptions in April, implying a rollover ratio of 95%. Having already raised TL351.3bn since the beginning of the month, the Treasury is expected to borrow approximately TL130bn through bond auctions scheduled for next week.