“BUDGETARY DISCIPLINE OF THE TURKISH REPUBLIC OF NORTHERN CYPRUS (TRNC) IN THE LIGHT OF EMU MAASTRICHT CRITERIA

Year 2011, Volume: 3 Issue: 2, 241 - 252, 01.12.2011

Okan Veli Şafaklı Mustafa Ertanın

Abstract

As it is widely known, economic measures mainly, aim to achieve sustainability
requiring macro-economic stability. Moreover, budgetary discipline should exist
to have macro-stability. Eventually, it is acknowledged that budgetary discipline
is an indispensable element of sustainability. In this regard, European Union (EU)
requires countries to budgetary discipline as a prerequisite of functioning within
Eurozone. Maastricht Criteria must be fulfilled in order to qualify for Eurozone
membership consists of elements of budgetary discipline. These are; Budget
Deficit: Budget Deficit must not exceed 3% of GDP; and National Debt:
Government Debt must not exceed 60% of GDP.
Turkish Cypriot authorities are currently implementing “Program for the Future
Adoption of the Acquis” (PFAA) in order to fulfill the relevant economic and
political criteria as the preconditions for EU accession. Despite the
implementation of this Program, the potential of TRNC to fulfill the convergence
criteria in order to qualify for Eurozone membership is yet not satisfactory.
When the convergence criteria of fiscal discipline is considered, it is clear that the
position of TRNC is worst than Greece. The ratio of Budget Deficit of TRNC to
GDP is 16 % in 2009 while this ratio of Greece is 12.7 % for the same year.
Turkey’s donors finance this deficit even though specified percentage is officially
recorded as credit. Thus, there is no payment of debt stock declared by TC
authorities and demanded by authorities of Turkey. This shows that TRNC has
potential debt burden seriously jeopardizing budgetary discipline.
In addition to absolute figures of TRNC budget, there are other crucial factors
negatively influencing budgetary discipline. These are primarily tax, budget
revenue and expenditures elasticities in addition to issues of public expenditure
management system consisting of institutional framework, fiscal framework,
budget preparation process, budget execution and monitoring, accounting and
reporting, financial control, procurement systems, allocative efficiency, technical
efficiency and transparency and accountability.

Keywords

Budgetary Discipline, TRNC, EMU, Maastricht criteria

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