Publisher: Maaal International Media Company
License: 465734
Moody’s Investors Service (“Moody’s”) has today downgraded the Government of Turkiye’s long-term foreign- and domestic-currency issuer and the foreign-currency senior unsecured ratings to B3 from B2.
The foreign-currency senior unsecured shelf rating was downgraded to (P)B3 from (P)B2. Concurrently, the foreign-currency backed senior unsecured rating of Hazine Mustesarligi Varlik Kiralama A.S., a special purpose vehicle wholly owned by the Republic of Turkiye from which the Treasury issues sukuk certificates, was also downgraded to B3 from B2. The outlook is changed to stable from negative for both issuers.
The downgrade to B3 reflects the following key drivers:
The stable outlook reflects Moody’s view that the risks at the B3 level are balanced. While the authorities’ highly unorthodox economic policies will likely exacerbate the current economic imbalances, the sovereign has relatively low external debt and moderate refinancing needs for the remainder of the year and next year.
Concurrently Moody’s lowered Turkiye’s local-currency country ceiling to B1 from Ba3 previously. The two-notch gap between the local-currency ceiling and the sovereign rating mainly balances a relatively limited government footprint in the economy with unpredictable institutions and government actions, elevated domestic and geopolitical political risks and significant external imbalances. The foreign-currency ceiling was lowered to B3 from B2. The two-notch gap between the foreign-currency ceiling and the local-currency ceiling mainly reflects weak policy effectiveness as well as the low level of foreign currency reserves, which leads to elevated transfer and convertibility risks.