Public Finance in Türkiye Under the Shadow of Crises: Expenditure Trends and the Transformation of Budget Composition Over the Past Decade

Özet

This study examines the structural transformation of public finance in Türkiye that has become increasingly pronounced in recent years under the impact of the COVID-19 pandemic, the 2023 earthquakes, and persistently high inflation. In order to reveal the direction and depth of this transformation, expenditure dynamics at the levels of central government, local governments, and the Social Security Institution (SSI) are analyzed for the 2015–2024 period within the framework of economic and functional classifications. The findings show that expenditure “surges” during crisis periods have permanently shifted public spending to a higher level, thereby confirming the validity of the Peacock–Wiseman Hypothesis for the central government. In contrast, local governments have experienced a pronounced “fiscal squeeze”, as their share of GDP has declined despite increasing operational responsibilities; in particular, the decrease in the share allocated to investment indicates a weakening of long-term infrastructure and development capacity at the local level. From a functional perspective, while the share of health expenditures in the central budget has increased, the decline in the share allocated to education signals a notable shift in policy priorities. Moreover, a clear trend of “fiscal centralization” in health financing is observed. While the share of the SSI in health expenditures has decreased, the central budget has assumed a more dominant role as both financier and investor. The analysis also reveals a dramatic increase in the EU-defined general government debt stock after 2020. Although the “denominator effect” created by high inflation has temporarily masked ratio-based increases, the budget structure has become increasingly rigid. As of 2025, more than 14 percent of the central government budget is allocated to interest payments, indicating that Türkiye’s budget has evolved from a strategic development instrument into a document primarily focused on “maintenance and financing”. The study emphasizes the need to return to investment-oriented budgeting and to rebuild fiscal space in order to ensure long-term fiscal sustainability.