Turkish deputy PM slams S&P for timing of rating cut decision
Turkish Deputy Prime Minister Mehmet Şimşek has slammed an unexpected move by Standard & Poor to cut its sovereign debt rating on Turkey further into junk territory ahead of the upcomig snap elections.
“The timing of the decision is very meaningful,” said Şimşek, who is in charge of economy, in a series of Twitter posts on May 2.
“Has anything new happened that has required them to bring this rating cut forward?” Şimşek asked, noting that the international rating agency was scheduled to review its rating and outlook on Turkey in August.
“Cutting the credit rating after [Turkey’s] decision to bring elections forward is wrong,” he said, referring to the June 24 general and presidential elections, which were initially scheduled for November 2019.
The early election decision has eased market uncertainty and Turkey is mending ties with both the United States and the EU, he said,
The agency said it did not believe the Central Bank hiking its late-liquidity window rate last week would be sufficient to bring down inflation to the state-lender’s 5 percent target or reduce the volatility in Turkey’s real effective exchange rate.
The bank’s reluctance to aggressively tighten policy in the face of double-digit inflation has increased concern that it is under pressure from Turkish President Recep Tayyip Erdoğan. S&P alluded to that in its statement, saying the central bank has been “facing increasing political pressure.”
With the weakening of the lira against the dollar, the private sector will have a harder time repaying its foreign currency-denominated debt, S&P said, adding this would negatively impact government debt—40 percent of which is denominated in foreign currency.
Numerous large Turkish companies have sought to restructure their debts. Reuters reported in April that Turkish food giant Yıldız Holding would restructure $6.5 billion of its $8.5 billion in debt.
Turkey’s Doğuş Holding, with outstanding loans that stood at 23.5 billion liras ($5.73 billion) at the end of 2017, is also in talks with banks on debt restructuring, according to sources familiar with the matter.