Turkish lira/Bloomberg

Moody's downgrades Turkey, finance ministry challenges move

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The rating agency said that the downgrade reflects its view that the risk of a balance of payments crisis continues to rise and with it the risk of a government default.

Sunday 16, June 2019 BY KUDAKWASHE MUZORIWA

Moody's Investors Service (Moody's) has downgraded the Government of Turkey's long-term issuer ratings to B1 from Ba3 and has maintained the negative outlook, having previously cut the rating to Ba3 from Ba2 in August last year.

In a statement, Moody's also said that it has downgraded to B1 from Ba3 the backed senior unsecured bond ratings of Hazine Mustesarligi Varlik Kiralama, a special purpose vehicle wholly owned by Turkey from which the country’s treasury issues Sukuk lease certificates.

The Turkish Treasury and Finance Ministry immediately issued a statement saying the downgrade was not in accordance with the country’s economic indicators.

The Ministry stated that “The decision does not conform with the Turkish economy’s fundamental indicators and thus creates question marks about the objectivity and impartiality of the institution’s analyses.”

Moody’s said that the impact of the continued erosion in institutional strength and policy effectiveness on investor confidence is increasingly outweighing Turkey's traditional credit strengths including its large, diverse economy and the low level of government debt.

According to Moody’s, Turkey is structurally highly reliant on external capital flows and confidence in its ability to continue to attract the large sums needed each year to repay debt and sustain growth is waning.

However, the Turkish Treasury listed economic indicators in comparison with other emerging market economies and cited developments such as falling inflation and rising tourism revenues, adding that, “we sadly see that very positive developments are being ignored.”

 

TAGS : Moody's Investors Service, negative outlook, Sukuk, Turkish Treasury and Finance Ministry

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