Turkey’s government on Thursday unveiled a budget for next year that envisages a sharp rise in public spending and a lowering of a key fiscal savings target that has formed the central pillar of its $10bn loan agreement with the International Monetary Fund.

Kemal Unakitan, finance minister, said the primary surplus – the budget surplus before interest payments – would be 5.5 per cent in the 2008 budget, compared with 6.5 per cent in each year since Turkey and the IMF agreed a recovery package from a devastating financial crisis in 2001.