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S&P, Moody’s Lower Turkey Ratings

S&P, Moody’s Lower Turkey RatingsS&P, Moody’s Lower Turkey Ratings

Two major global ratings agencies lowered Turkey’s ratings Aug. 17, saying they could be upgraded with certain economic improvements.

Standard & Poor’s said it lowered the country’s long-term foreign currency sovereign credit rating to ‘B ‘ from ‘BB-’ while maintaining the outlook at stable, Anadolu Agency reported.

The agency said it affirmed the short-term foreign and local currency sovereign credit ratings on Turkey at ‘B’.

“We could consider an upgrade if the government successfully devises and implements a credible economic adjustment program that bolsters confidence, stabilizes balance-of-payments flows and brings inflation under control,” the agency said in a statement.

Moody’s cut Turkey’s sovereign credit rating deeper into “junk” territory on Friday, citing a weakening of public institutions and the related reduction in the predictability of policy making in a country which is facing a currency crisis, Reuters reported.

“That weakening is exemplified by heightened concerns over the independence of the central bank, and by the lack of a clear and credible plan to address the underlying causes of the recent financial distress,” the agency said in a statement.

The agency said Turkey’s rating could be stabilized “if the Turkish authorities presented a coherent and effective economic plan in the near term that involves a material fiscal and monetary policy tightening to induce an orderly slowdown of the economy, leading in turn to lower inflation and inflation expectations as well as a reduction in the size of the current account deficit.”

“Significant external financial support would likely act as a supportive factor to the rating,” it added.

Moody’s lowered the rating to Ba3 from Ba2 and changed its rating outlook to negative in a move which came on the heels of a downgrade by S&P.

The lira has lost nearly 40% of its value against the dollar this year, sparking a sell-off in emerging market currencies and weighing on global stocks. The crisis has been precipitated by investor alarm about President Recep Tayyip Erdogan’s influence over monetary policy.

The sell-off has been fueled by a deepening dispute between Turkey and the United States, with Washington imposing sanctions and vowing to continue to do so as it seeks the release of a US pastor on trial in Turkey.

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