Er­do­gan la­bels rat­ing agen­cies as 'im­pos­tors' and 'rack­e­teers'

Scathing com­ments come af­ter two agen­cies sounded more alarm over the state of Turkey's banks.

Zambian Business Times - - FISCAL AND DEBT MANAGEMENT -

TURKEY has ac­cused West­ern credit-rat­ing agen­cies of de­lib­er­ately at­tempt­ing to un­der­mine the bank­ing sec­tor amid at­tacks on its cur­rency, the lira.

Fri­day's scathing com­ments from Turk­ish Pres­i­dent Re­cep Tayyip Er­do­gan and his son-in-law, Fi­nance Min­is­ter Berat Al­bayrak, came af­ter two agen­cies, Moody's and Fitch, sounded more alarm this week about the state of Turkey's banks, cit­ing im­pact of the cur­rency sell-off.

"These rat­ing agen­cies - in a way that has no prece­dent in the world - right af­ter ev­ery forex at­tack, have weighed in and made in­ten­sive ef­forts to cre­ate a pes­simistic view of our banks," Al­bayrak said in a speech in Is­tan­bul.

He said banks' bal­ance sheets were stronger than most of their global rivals.

Turkey's lira tur­moil could her­ald a global fi­nan­cial cri­sis

Er­do­gan, char­ac­ter­is­ti­cally, was more scathing.

"If they have their dol­lars, we have our God. They can't top­ple Turkey with dol­lars," he told sup­port­ers in the north-west­ern province of Ba­like­sir.

"Put this aside, leave those im­pos­tors, those rack­e­teers. They have said a lot of things about us."

The lira has lost 42 per­cent of its value against the dol­lar this year, deep­en­ing con­cern about lenders' as­set qual­ity and their abil­ity to ride out the cri­sis.

Drawn by lower in­ter­est rates, Turk­ish firms have bor­rowed in dol­lars and eu­ros for years.

The cur­rency slump has driven up the cost of ser­vic­ing that debt and in­vestors fear that banks could be hit by a wave of ris­ing bad debt.

Around $179bn of Turkey's ex­ter­nal debt ma­tures in the year to July 2019, ac­cord­ing to New York-based fi­nan­cial in­sti­tu­tion JPMor­gan's es­ti­mates.

Ma­jor­ity of that - around $146bn - is owed by the pri­vate sec­tor, ac­cord­ing to Reuters news agency. Er­do­gan added that Turkey was tak­ing steps to help the cur­rency, and was see­ing con­crete re­sults.

Ear­lier on Fri­day, the govern­ment said it would lower the level of with­hold­ing tax on lira bank de­posits, while rais­ing it on for­eign cur­rency de­posits.

The lira firmed some one per­cent af­ter the move. It was at 6.54 on Satur­day morn­ing, re­bound­ing strongly from an overnight low of 6.8994.

Er­do­gan's call to sell dol­lars

Pres­i­dent Er­do­gan has re­peat­edly called on Turks to sell their dol­lars and eu­ros to buy lira.

Fri­day's move by the govern­ment was aimed at mak­ing it less at­trac­tive for in­vestors to hold for­eign-cur­rency de­posits, al­though it was un­clear if it would work.

Data re­leased by the cen­tral bank on Fri­day showed for­eign ex­change held by Turks fell to $152.8bn as of Au­gust 24, down from $159.9bn on Au­gust 10, sug­gest­ing people were heed­ing Er­do­gan's call, or cash­ing in from the cri­sis.

Mean­while, Turkey's en­ergy reg­u­la­tor will raise elec­tric­ity prices by 14 per­cent for in­dus­trial use and nine per­cent for res­i­den­tial use from Septem­ber 1, ac­cord­ing to fig­ures pub­lished in the govern­ment's Of­fi­cial Gazette on Fri­day.

The rate hikes, which will fur­ther feed dou­ble-digit in­fla­tion, high­light an­other im­pact of Turkey's on-go­ing cur­rency cri­sis.

Ini­tially sparked by wor­ries about Er­do­gan's in­flu­ence on the cen­tral bank, the lira cri­sis has wors­ened over a rift with Wash­ing­ton over an US evan­gel­i­cal Chris­tian pas­tor de­tained in Turkey on "ter­ror­ism" charges.

Er­do­gan, a self-de­scribed "en­emy of in­ter­est rates", wants to see lower bor­row­ing costs to keep credit flow­ing, par­tic­u­larly to the con­struc­tion sec­tor.

In­vestors, who see the econ­omy head­ing for a hard land­ing, want to see de­ci­sive in­ter­est rate hikes.

Other data showed that the cen­tral bank's gross for­eign ex­change re­serves fell to $72.9bn as of Au­gust 20, from $79.1bn on Au­gust 10.

The cen­tral bank is due to hold its next rate-set­ting meet­ing on Septem­ber 13. Sources told Reuters on Thurs­day that one of its deputy gov­er­nors, Erkan Kil­imci, is leav­ing the bank.

The main BIST 100 share in­dex dipped 0.44 per­cent on Fri­day to 92,867 points.

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