اقتصاد کلان اصلاحات کشاورزی ترکیه: تجزیه و تحلیل تعادل عمومی قابل محاسبه موقتی

Turkey recently launched a set of structural reforms to address elimination of producer price subsidies in its agriculture, and replacing them with a targeted direct income transfer program. The paper investigates analytically viable options of the proposed agricultural-cum-fiscal reform and analyzes the formal links between the public sector fiscal balances, accumulation patterns, dynamic resource allocation, and consumer welfare under a medium-long-term horizon. We utilize a dynamic general equilibrium model. The model results suggest that even though there are expected modest welfare gains of consumers’ intertemporal efficiency, the repercussions of these policies on the rural economy and aggregate gross domestic product are likely to be deflationary.

Turkey recently launched a comprehensive policy reform program towards disinflation of domestic prices under the guidance and proviso of the IMF and the IBRD. The major elements of the program included monetary targets through a quasi-currency board and fiscal austerity via specific targets for non-interest primary expenditures. It also entailed a detailed program of structural reforms addressing elimination of producer price subsidies in agriculture, and replacing them with a moderately targeted direct income transfer program. This shift is expected to create major repercussions both within the domestic economy and also in the fiscal balances of the public sector. The Turkish macroeconomic environment is known to be very fragile and unsustainable for over a decade. The post-1990 period witnessed rapid deterioration of the fiscal position of the successive Turkish governments, and the public sector borrowing requirement increased to as much as 15% of the GNP in 1999, just before imposition of the disinflation program. The state resorted to a massive operation of domestic debt financing by way of new issues of debt instruments. As a result, the stock of domestic debt grew rapidly to reach 68% of the GNP in 2002. The interest expenditures on domestic debt surmounted to 22% of the GNP by the end of 2001, and continued to exert an important source of macroeconomic disequilibrium within the domestic economy. In spite of the shift in the nature and the scope of the December 1999 and June 2001 stabilization programs, structural reforms in banking, agricultural, energy and telecommunication sectors remain intact., With respect to agriculture, the Turkish state had a long tradition of sectoral support by way of direct price subsidies, and indirect means of subsidized use of agricultural credit, virtual direct un-taxation of rural incomes, and guaranteed state purchases of strategic commodities such as tobacco, sugar beet, and nuts. Recent studies3 show that the total monetary value of aggregate subsidization reached to 11.3 billions US$ as of 1998, and that about 70% of this cost is borne directly by the domestic consumers. Budgetary transfers to the sector amount to an average of 3.5 billions US$ per annum over the last five years. It is the purpose of this study to investigate analytically viable options of the proposed agricultural-cum-fiscal reform and adjustment under conditions of a heavy domestic debt burden and persistent foreign trade deficit. We investigate the process of Turkey’s recent move towards direct income support in agriculture replacing the long history of price interventions; and analyze the formal links between the public sector fiscal balances, accumulation patterns, dynamic resource allocation, and consumer welfare under a long-term horizon. Both the aggregate macro and sectoral micro consequences of agricultural price reforms and public debt management are analyzed within a set of alternative policy environments to smooth out public debt over future generations. To this end, we utilize an intertemporal, multi-sector, general equilibrium model for the Turkish economy. The model is an extension of the neoclassical growth model, and is based on the infinite-lived Ramsey-consumer framework with maximization of intertemporal preferences subject to the discounted stream of income sources. The distinguishing features of the model include explicit recognition of the demand and supply interlinkages between agriculture and the rest of the domestic economy within a fully endogenous structure for characterizing price formation; flexible functional forms in describing economic activity; and explicit modeling of fiscal position of the public sector with accumulated past domestic debt so as to characterize the immense fiscal debt rescheduling challenge of the current Turkish economy. The integrated treatment of intertemporally dynamic adjustments within a multi-sector, multi-factor model offers several attractions for fiscal policy analysis. Traditional (static) CGE analyses of taxation and trade/price liberalization could only account for the static, once-and-for-all effects, and were not able to capture the long run dynamic effects which involve intertemporal behavior such as saving and investment decisions. The incorporation of saving and investment decisions in the CGE models of the static-genre depends on the parametrization of fixed saving rates out of disposable income, and on ad hoc macro closures. These approaches often led to non-robust policy results with arbitrary dependence on modeling specifications (Diao, Roe, & Yeldan, 1998; Srinivasan, 1982). By way of incorporating explicit intertemporal optimizing behavior on the part of rational agents, the current model is able to address many questions of long run effects of tax and subsidization incidence, fiscal debt, foreign exchange constraints on growth, accumulation, and consumer welfare within a theoretically consistent framework. The plan of the paper is as follows: in the next section we provide a brief overview of the recent developments in the Turkish agricultural economy. We introduce the characteristic features of the model in Section 3, and implement our policy simulations in Section 4. We reserve Section 5 for summary conclusions and policy implications.

Some caveats are in order on the limitations of the study before we go on with the summary of our main findings. First, it has to be clear that, with this type of a methodology, no distinctive conclusions can be inferred about the characterization of the future path of the economy based on “calendar” dates. The policy experiments performed are basically of comparative nature and are meaningful only in relation to each other, rather than revealing forecasts of the future. Secondly, one has to note that the adjustment path as characterized by the simulation exercises reflect equilibrium relationships on a smooth time horizon, mainly in the absence of rigidities and/or structural bottlenecks. Thus, the speed of transitional adjustment of many variables to their respective equilibrium paths should not be taken as a measure of the global stability properties of the modeled economy, but rather as a direct outcome of the laboratory characteristics of a macroeconomic model with continuous, well-behaved functional forms. The model results reveal that output consequences of the warranted shift of agricultural support policies from price subsidies to direct income transfers are likely to be deflationary. The expected contraction of the aggregate GDP is due to both the decline in agricultural output, and also to the fall in capital investment expenditures. Under the new agricultural income support regime, our results further reveal an increased ratio of the stock of debt to GDP, with interest costs rising and further curtailing capital investments. With relative contraction of the gross domestic product, the burden of the fiscal debt is more severe, and the path of private consumption is significantly impeded. Consequently, the initial (modest) gains of consumers’ intertemporal welfare turn negative over a longer time frame. Welfare gains were computed as changes in equivalent variations. Overall elimination of the existing price subsidies with no compensating income support measures report positive gains in this indicator, mainly as a result of the (partial) elimination of the existing price distortions. Yet, invigoration of the scheme of direct income support to farmers has a significant impact on this metric. The income transfers from the central budget culminate the problem of fiscal deficits and signal deepening of the financial fragility of the public sector in the asset market. Within the context of our model, this increase of financial fragility raises the country risk premium and causes an increase of the domestic rate of interest. The real output effects of all these prove to be deflationary in the domestic economy. A major flaw, in our view, on the discussions of agricultural policy making in Turkey is to treat the rural economy in isolation, and to evaluate the budgetary costs of agricultural support policies independent of the fiscal constraints and debt obligations. However, our modeling results clearly underscore the main dilemma of the current Turkish agricultural-cum-fiscal policy: given the high servicing costs on fiscal debt, the state has very limited (and often conflicting) options to address its objectives of agricultural income support and fiscal austerity. A second dilemma concerns the expected deflationary consequences of the reforms over the price support scheme. With the elimination of the direct and indirect price supports to the farmers, agricultural output supply is expected to be negatively affected in the short-to-medium run, and in the absence of compensating welfare programs, such a policy shift will likely have significant social repercussions on both the rural and the urban economy. Given that the sector currently employs as much as 45% of the labor force, the social welfare implications for the rural economy is likely to dominate the policy setting in the interim. In closing, we note that similar results were also obtained by Cakmak and Kasnakoglu (2002) by employing a partial equilibrium methodology: They have calculated that harmonization of the Turkish agriculture with the Common Agricultural Policy (CAP) of EU decreases output in most of the agricultural products. Herok and Lotze (2000), on the other hand, concluded that agricultural output and domestic welfare in the Central and East European Countries will rise after EU integration, but liberalization of CAP will decrease agricultural output in these countries after EU membership. Our simulation exercises are designed to capture two objectives of the Turkish agricultural reform: (i) to reduce the cost of the existing agricultural support system on the budget, and (ii) to converge the Turkish support system to the regulations and the limitations set forth by the WTO. Considering that the existing CAP of EU is less restrictive than the limitations of WTO on agricultural supports, possible liberalization of CAP towards WTO standards will not impose further restriction on the new Turkish agricultural support system in terms of level of support and choice of instrument. However, the existence of a large rural population in Turkey is likely to remain as the main constraint on the fiscal discipline in implementing any agricultural support system. Under these conditions, the short termism embedded in the maturities of the public sector assets is a significant cause of concern for the continued confidence crisis and the increased fragility (riskiness) of the domestic financial system. These elements, no doubt, lie at the heart of the reason for the presence of significantly high real rates of interest in the Turkish domestic asset markets, and are directly responsible for the invigoration of a series of adjustments which, in the technical language of our modeling analysis, lead to distortions of the investment path of the economy where expected gains of agricultural price reforms are exhausted. The ongoing attempts of price reform in an environment characterized by coordination failures and unsustainable fiscal targets are clearly no easy task, with realized outcomes falling short of expectations of achieving a more efficient allocation of resources and of a rise in social welfare. Our results further underscore that the more delayed the necessary adjustments towards a sound fiscal reform, the higher would be the gap between such expectations and their realizations. On the other hand, this undesirable environment can be partly reversed by use of EU funds for regional development as Turkey succeeds in her efforts for full membership.