Despite the expected decisions by the International Monetary Fund and the World Bank to grant Turkey with the previously cancelled loans, Standard and Poor’s downgraded the country’s long-term rating from stable to negative, on Wednesday, July 11, according to AFP news agency.
The credit rating firm’s decision is a result of the belief that Turkey is experiencing rising political and economic instability. Additionally, the agency claims that the risks associated with the new World Bank and IMF loans have increased, and the ratings could be downgraded within a year. Such a downgrade would result in Turkish bonds to be seen as speculative investments, thus forcing the government to increase the interest rates to compensate for the associated higher risk.
S&P stated however, that the outlook could be revised to stable if the Turkish government regains market confidence in the coming future and if real interest rates decline to acceptable levels.
Turkey’s long and short-term issuer credit ratings currently stand at B-minus/C, whereas its foreign currency senior unsecured debt rating stands at B-minus. —( MENA Report)
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