Apr 15 2019

Turkish economic reforms not enough to restore lira trust - S&P

The reform package announced by Turkey's finance and treasury minister last week did not go far enough to restore confidence in the lira at home or abroad, a top S&P Global analyst said on Monday.

“The big question for foreign investors and for Turkish households is whether the lira is still an investable currency,” Reuters quoted S&P’s top EMEA sovereign analyst, Frank Gill, as saying.

“In our opinion the reform package did not answer that question,” he said.

Turkish Finance and Treasury Minister Berat Albayrak revealed a reform package last Wednesday, including the provision of nearly $5 billion in loans to Turkish public banks.

The package aimed to restore confidence in Turkey’s economy after a prolonged period of financial turmoil. A recent shock to the lira occurred in March after it was revealed the central bank had sold over $6 billion of its foreign currency reserves in the space of two weeks, likely to prevent a sharp slide to the currency before the local elections on March 31.

However, some observers have criticised the “lack of detail” in Albayrak’s planned reforms, Reuters reported.

Foreign press reports have said Albayrak performed poorly at a meeting with investors and at the World Bank-IMF meetings last week.

 "It was an absolute shit show," one emerging market fund manager quoted by Axios said of Albayrak’s appearance at the World Bank-IMF meetings.

“Earlier this month S&P had said Turkey’s B+ foreign currency and BB- domestic currency ratings were not currently at risk of a downgrade though a further fall in lira would be ‘very, very bad news’ for the country’s companies and banks,” Reuters reported.

The lira fell almost a third against the dollar last year, and has been on a downward trend since January.