Moody's: Turkey faces tight funding

Turkish municipalities are currently facing a challenging combination of a severe economic downturn and tight funding environment, Moody's Investors Service said in a new report.

Moody's said it expects municipal budgets to be impacted by the economic downturn that is hitting Turkey primarily on the revenue side, since a high proportion of their revenues comes from national shared taxes, including mainly value-added tax, corporate and personal income taxes.

Overall, municipalities display limited shock absorption capacity in view of the limited control on revenues and the socially-sensitive responsibilities, the agency said.

In the near future, Turkish municipalities will be required to exercise fiscal discipline and to leverage their expenditure flexibility - primarily on the capital side of the budget - to manage budgetary pressures, Moody's said.

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