Effect of puplic sector internal borrowing in Turkey after 1980s on puplic sector invesment and saving

Borrowing is an important financing instrument that has been used almost in each country. As a result of insufficient tax revenues, governments have been become indebted to cover their current needs and in this way, they have been financing their own expendituresPrior to 1980, in Turkey, the public had been tended to the resources of Central Bank in terms of deficit and after 1980, the public had been mostly tended to the internal borrowing. As a result of the increasingly borrowing of the public, interests rates were increased and thus, the possibilities with the high interest rate of the private sector funding were decreased. Particularly, during the 1990s, the shares of investment spending have decreased within the consolidated budget incomes and thus, the shares of interest payment have increased. In this way, on one hand, the internal borrowing process has prevented the production capacity of the country and effectiveness of the production capacity and on the other hand, the income inequality has been increased.One of the mostly used methods of financing public deficits, the internal borrowing has affected negatively the interest rates, the debt resources and the macro equilibriums of the economy. The extremely borrowing of the government in Turkey has become the most important reason of the current crisis in the economy of Turkey.In this scope, as a result of the development of the internal borrowing between the years of 1980-2006, the effects of the internal borrowing have been reviewing in this study. The purpose of this study has determined the effect of the internal borrowing of the public sector that has been increased after 1980 on the investment and saving of the private sector. Particularly, it has been seen that the internal interest rate that is increasing in complying with the internal borrowing has the dimmer effect on the private investment. In the study, the economical effects of the internal borrowings between the years of 1989-2006 and in particular the changes on the investments have been attempted to review.As a consequence, the internal market borrowing has increased the interest that is the cost of the borrowing and accordingly, it has caused that the investments that have been planned to be done in the reel economy through the private sector and crowding out of the investments as well as it has been caused that the savings have been tended to the public borrowing papers by crowding out and on the other hand, the internal borrowing documents of the state ınternal borrowing documents have been obtained to finance the public deficits. Through the budget friendly for the public sector borrowing necessity, the crowding out effect has been occurred on the public sector investment.