Rating upgrades show 'we are on right track,' says Şimşek

ISTANBUL

Credit rating upgrades by major rating companies show that “we are on the right track,” Treasury and Finance Minister Mehmet Şimşek has said, referring to the economic program the government is implementing.

On May 3, Standard & Poor’s raised Türkiye’s ratings to "B+" from "B," citing economic rebalancing. Fitch Ratings upgraded the country’s credit rating this year to B+ in March, while Moody’s raised its outlook to positive in January.

The medium-term program prioritizes price stability, bringing inflation down to single digits, fiscal discipline and structural transformation, Şimşek said at an event in Germany.

He reiterated that the annual inflation rate will peak at above 70 percent in May.

“Afterwards, inflation will decline sharply with the program we are implementing and we will return to single-digit inflation in 2026,” Şimşek said.

The annual inflation rate climbed from 68.5 percent in March to 69.8 percent in April, the latest official data showed earlier this week.

The minister also noted that the current account deficit has fallen to $30 billion, while Türkiye's external debt rollover ratio and access to financing opportunities in financial markets have increased.

The positive results of the program are reflected in the decisions of credit rating agencies, Şimşek said in earlier comments on S&P’s ration action.

"We are determined to carry the confidence in our country to the highest level with our strengthened program," he wrote on the X social media platform on May 4, noting that S&P lifted the country’s rating by 1 notch after 11 years and kept the outlook positive.

Following local elections, the coordination between monetary, fiscal and income policy is set to improve, amid external rebalancing, S&P said in a statement on May 3.

With no scheduled national elections until 2028, Turkish policymakers have space to implement policies to compress demand and inflation, using all available wage-setting, fiscal and monetary tools, it added.

The rating agency said it expects the Central Bank to take a wait-and-see approach to further interest rate hikes, while reducing and simplifying regulations pertaining to banks' balance-sheet management, in an effort to increase holdings of Turkish lira and the cost of credit.

“We could raise the rating further should balance-of-payments outcomes continue to improve, inflation decline, and domestic savings in Turkish lira rise, leading to a rebuilding of the government's usable foreign currency reserves — gross reserves minus foreign currency borrowed from domestic residents,” S&P said.