Turkey on Sunday raised its gasoline tax to help finance a 1.120 trillion lira ($42.2 billion) budget increase for 2023 after February earthquakes and a May presidential election pushed up costs, Reuters reported.

The extra fuel tax will help reduce the budget deficit, which jumped to £263.6 billion in the first five months of the year from £124.6 billion a year earlier, but it could also help inflation, which fell to 38.21% in June compared to a 24-year period. 85.51% in October last year.

The larger deficit was largely due to increased spending ahead of May’s election, when President Tayyip Erdogan was elected to a third term, as well as reconstruction efforts after earthquakes in southern Turkey.

The earthquakes, which killed more than 50,000 people, are expected to cost Turkey more than $100 billion in total.

Significant increase in fuel tax

In the latest move to shore up the Treasury’s cash reserves, petrol tax was raised to £7.52 per liter from £2.52 ($0.1), while duty on diesel rose to £7.05 from £2.05.

The impact of tax adjustments, along with value added tax (VAT), should add about £6 to the final price at the petrol station, more than 20 per cent per litre, Reuters calculations show.

Ankara’s 1.12 billion lira budget increase was approved by parliament on Saturday and follows other recent tax hikes in a bid to bolster state coffers, including a two percentage point increase in VAT.

The lira has lost more than 80 percent of its value since 2018 and will lose more than 28 percent in 2023, pushing up prices for a wide range of goods from fuel to food in the import-dependent country. (photo: Dreamstime.com)