Turkey slats Moody’s downgrade, questions company’s objectivity

Moody’s decision to downgrade Turkey’s credit rating is incompatible with fundamental indicators, Turkey’s Treasury and Finance Ministry said, adding that the country will never abandon free-market principles.

The downgrade “raises questions” about the objectivity of the credit-rating company’s analysis, Turkey’s Treasury and Finance Ministry said in a statement early Saturday. Moody’s Investors Service cut Turkey’s long-term issuer rating to B1 from Ba3 on Friday, citing an increasing risk of a balance-of-payments crisis and a government default.

Rebuffing Moody’s statement on weak foreign exchange reserve buffers, the Treasury and Finance Ministry said the level of debt to reserves is higher in some emerging-market countries that have a better credit rating than Turkey.

“Foreign exchange reserve buffers are weak and Moody’s expects them to weaken further over the next two years relative to economy-wide short-term liabilities,” Moody’s said.

The ministry said it is “sad” that the rating company ignored developments including the Judicial Reform Strategy Program, completion of the recapitalization of state lenders, a deceleration trend in inflation and an increase in tourism income.

“Since 2003, Turkey’s main economic policy has been to follow free-market principles,” and the country will “never abandon” a floating currency, the free flow of capital and its support of entrepreneurship, the ministry said.

source: Bloomberg