Macro and Politics

* The Treasury and Finance Ministry will release September central government budget figures @ 11:00 local time. The Treasury cash balance posted a deficit of TL467.2bn in September, alongside a primary cash deficit of TL193.3bn. This brought the cumulative Treasury cash deficit to TL1.9tn in Jan–Sep, while the primary cash balance recorded a surplus of TL312.5bn over the same period. We expect today's figures to show that the central government budget swung back into deficit in September, following a surplus of TL12.9bn in August. We calculate that the sliding-scale fuel tax mechanism will result in approximately TL500bn in foregone tax revenues in 2026, including the associated VAT impact of lower special consumption tax (SCT) collections. Under the gradual phaseout of the mechanism that began in July, the fixed SCT on diesel, which was reduced to zero in August, is set to increase to TL3 per liter in September, TL6 in October, TL9 in November and TL12 in December. As the mechanism is phased out and fixed SCT rates are gradually restored, we expect a recovery in fuel-related tax revenues in the final quarter of the year. Nevertheless, revenue growth remaining below inflation and persistently elevated interest expenditure continues to warrant attention from a fiscal perspective. Our 2026 budget deficit forecast stands at TL2.8tn, equivalent to 3.3% of GDP.

* The CBT will release weekly foreign portfolio flows, money and banking statistics, and international reserves for the October 2 – 9 period today at 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that gross reserves increased by USD4.2bn to USD171.6bn, while net reserves rose by USD3.9bn to USD57.6bn during the week. We expect today’s official data to confirm a reserve accumulation in line with our analytical balance sheet-based calculations. To recall the previous week’s data: Foreign investors were net sellers of USD190mn in equities and USD485mn in bonds (excluding repo transactions) during the September 25–October 2 week. Foreigners’ share in the total bond stock slipped to 6.6%, its lowest level since early July. Moreover, residents’ FX deposits (excluding gold and adjusted for the EUR/USD parity effect) rose by USD984mn over the same week, while their total FX deposits (including gold, adjusted for the price effect) grew by USD851mn. Besides, the CBT’s gross reserves fell by USD3.8bn to USD167.4bn in the September 25–October 2 week, extending its decline to six successive weeks, with a cumulative loss of USD21.1bn. Net reserves, by contrast, edged up merely by USD407mn to USD53.7bn. The swap stock increased by USD2.4bn to USD15.9bn, leaving net reserves excluding swaps USD2bn lower at USD37.8bn.