Politics

Fitch downgrades Turkish debt to B with negative outlook


TURKEY. Fitch Ratings decided on Friday 8 July 2022 to downgrade Turkey’s long-term foreign currency sovereign debt (IDR) rating from B+ to B. The British agency, a wholly-owned subsidiary of the American Hearst Corporation, justifies this downgrade by “rising inflation and general concerns about the economy, the growing current account deficit due to increasingly interventionist and unpredictable policies“. It adds a negative outlook.

Inflation in the country continues to hit record highs and, due to the conflict in Ukraine, commodity and energy prices are rising. It stood at 78.62% in June 2022, its highest level for 24 years. The currency crisis is in full swing with the pound in continuous decline losing 44% of its value against the dollar in 2021 and a further 23% since the beginning of 2022.  

As of 1 July 2022, the central bank’s net foreign exchange reserves remained close to their lowest level in twenty years at $7.51bn. “We estimate that the central bank’s net foreign exchange asset position turned slightly negative in June and fell to minus $64bn excluding currency swaps, similar to the level in December 2021. We expect international reserves to fall to $94bn by the end of 2022 and to $88bn in 2023, bringing the current account reserve coverage to 2.7 months, below the median ‘B’ forecast of 3.8 months,” the UK analysts commented.



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