Turkish Defence Is Paid for Twice, Once by the Budget and Again by an Off-Budget Fund

Ask where Turkish defence money comes from and most people point to the budget. That is only part of the answer. The Ministry of National Defence budget pays soldiers and buys fuel, but a separate off-budget fund, a state export bank and the companies’ own balance sheets carry a large share of the industrial bill. Here is how the pieces fit.

How Big Is the Turkish Defence Budget Really?

It depends on who is counting. The 2026 budget entered into force on 1 January 2026 after parliament approved it in late December 2025. Defense News reported a total defence and security allocation of about $27.3 billion, a rise of roughly 30 percent on 2025, with the Ministry of National Defence receiving about $19.1 billion. By that account personnel and social security took about 54 percent of the ministry’s money and procurement about 44 percent.

A wider definition gives a far bigger number. Defence-Blog cited Vice President Cevdet Yılmaz as saying the government had set aside 2.155 trillion lira (about $51.4 billion) for defence and internal security, including 953 billion lira for police, gendarmerie and coast guard. NATO-linked projections reported by the Turkish press put Türkiye’s 2026 outlay near $48 billion. These figures are not contradictory so much as built on different baselines, exchange rates and definitions of what counts as defence. Treat any single headline number with care.

Inflation adds another trap. With Ankara’s own Medium-Term Programme revising 2026 year-end inflation to 28.4 percent, nominal lira increases say little about real purchasing power. We looked at that problem in our piece on the 229 percent spending plan through 2029.

Why Is the Ministry Budget Not the Whole Story?

The personnel line is large and fixed. A conscript and professional army is expensive to feed, house and pay, so the money left for equipment from the ministry’s own allocation is smaller than the topline suggests. Procurement of major systems therefore leans on a different channel.

That channel is the Defence Industry Support Fund, known in Turkish as SSDF. Defence-Blog noted that officials expect it to push actual defence outlays above what the main budget shows.

What Is the Defence Industry Support Fund and Where Does Its Money Come From?

The fund was created by Law No. 3238 in 1985 and is managed by the Presidency of Defence Industries (SSB), with decisions taken by the Defence Industry Executive Committee. For the agency’s wider role, see our explainer on the SSB that signs Türkiye’s defence contracts.

According to a legal commentary summarising the framework, revenue comes from several sources:

• annual budget allocations and transfers from the Ministry of National Defence budget;
• fixed shares of certain tax receipts, set by a later amendment (Law No. 4842), described as 6 percent of income and corporate tax, 20 percent of motor vehicle tax and 25 percent of inheritance and transfer tax;
• transfers from the Turkish Armed Forces Foundation and shares of lottery and similar games;
• transfers the President may direct from other statutory funds;
• smaller items such as a levy on cinema and theatre tickets, donations and income from the fund’s own assets.

The same commentary says roughly 80 percent of the fund’s 2023 revenue came from tax allocations. Treat the percentages as a summary of the statute rather than a current audit; the rules have been amended, and the government floated further revenue ideas in 2024, including notary and land registry fees. A proposed credit card levy was dropped.

How Much Does the Fund Spend, and Why Can Nobody See the Details?

Reporting on the Court of Accounts (Sayıştay) 2023 audit said the fund took in about 135.1 billion lira and spent about 114.2 billion, of which roughly 104.3 billion went on goods and services. As the number of projects grew, and as more classified projects were added, the fund’s income and expenditure were placed under secrecy rules. Outsiders therefore see the fund through occasional audit figures and official remarks, not a published project ledger.

One Turkish report put the number of active defence projects at around 750, with combined contract value near $75 billion. That figure is secondary reporting and cannot be checked against an official list, so read it as an order of magnitude.

Why Does the Gap Between Budget and Capability Matter So Much?

Percent-of-GDP comparisons hide the mix. The share of the budget going to people rather than equipment and research decides how much capability a lira buys. Defense News put Türkiye’s defence burden at 2.33 percent of GDP in 2026, with projections of 2.83 percent in 2027 and 3.2 percent in 2028. At NATO’s June 2025 Hague summit, allies pledged 5 percent of GDP for defence and security-related spending by 2035, including at least 3.5 percent for core defence. Meeting that path means either raising the personnel-heavy ministry line or leaning harder on off-budget instruments such as the fund.

A domestic-production model also changes the arithmetic. When most procurement money goes to Turkish producers, spending turns into jobs, tax receipts and export capacity, and part of it flows back to the state. Imported programmes do not behave that way.

Who Else Pays Besides the State?

Company money matters more than it first appears. Turkish primes self-fund development more often than outsiders assume. Kale, for instance, paid for two of its three missile turbojets itself. Ownership structures also shape who bears risk. Several of the biggest firms are held by military foundations and the state, a point covered in our guide to who owns Türkiye’s defence industry.

The model is simple in outline. The state commits to a domestic customer base through SSB contracts, which gives a company the order book it needs to borrow and invest. Exports then spread the fixed costs. SSB has put the localisation rate of its projects at 83 percent, so a large part of each lira spent stays inside the Turkish supply chain.

Who Finances Exports? The Role of Türk Eximbank

Selling abroad needs credit as much as hardware, and many customers are not rich. Türk Eximbank, the state-owned export credit bank, is the main instrument. A Defence Industry Export Support Credit Protocol between the then Defence Industry Undersecretariat and Eximbank was signed on 11 March 2013, according to Defence Turkey. Under it, the two institutions jointly evaluate foreign requests for credit.

The buyer’s credit terms, as summarised in our guide on how countries buy Turkish weapons, allow up to 85 percent financing for contracts with repayment of 24 months or more, and up to 100 percent for shorter maturities, for Turkish-origin goods only. Borrowers must meet IMF and World Bank criteria for commercial borrowing, which leaves out heavily indebted states from some products. That limit is one reason SSB talks about separate credit facilities for customers with small budgets.

Export volumes give the scale. Defence exports reached about $10.5 billion in 2025, according to figures cited in our NATO spending analysis. Whether Eximbank financed any given sale is rarely disclosed.

What Do Offsets Add to the Picture?

Large export deals often carry industrial participation or technology-transfer terms, which shift part of the financing burden into local production and know-how for the buyer. The reported $10 billion, 48-aircraft KAAN agreement with Indonesia, announced in June 2025, includes local production and technology transfer. Terms for such packages are seldom published in full. The mechanics are covered in our offsets guide.

What Is Still Unclear?

Three things stay hidden. The exact size of the SSDF each year is classified. The split between lira and foreign-currency commitments is not public, though import content in big programmes exposes the budget to exchange rate moves. And no public source separates how much of any programme is paid by the ministry, the fund, the company and a customer’s credit line.

For readers tracking the sector, the practical advice is to compare like with like. Check whether a figure is the ministry budget, the wider security envelope or a NATO-definition number, which currency and year it uses, and whether it includes the off-budget fund.