Moody's ups some Turkey ratings

Moody's Investors Service said it raised the Republic of Turkey's local currency debt rating to B2 from B3, citing continued improvement in the country's public sector debt dynamics. Moody's also upgraded Turkey's country ceiling for foreign currency bank deposits to B2 from B3, which reflects better but still weak external liquidity.

The outlook on these ratings had been positive since October 2003 and is now stable following the upgrades. The outlook on the B1 foreign currency government bond rating and the B1 country ceiling for foreign currency debt remains stable.

The rating agency said that the significant decline in interest rates and the relative stability of the exchange rate have helped to ease domestic debt refinancing pressures. Thus far in 2004, the government's fiscal results have outperformed the IMF program targets as nominal interest rates dropped nearly in half and growth accelerated. Still, the ratio of interest service to government budget revenues is high even for a country in the B rating range, and certain vulnerabilities related to the composition and maturity structure of the domestic debt remain rating constraints.

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