Fitch Ratings assigned a long-term foreign currency rating of B to the Republic of Turkey $500 million Eurobond maturing in 2007. The bond issue comes just four days after Fitch said it was maintaining its sovereign ratings of B with a stable outlook following the landslide election victory of the Justice and Development Party last week.
Fitch says the Eurobond issue represents a strong statement that Turkey continues to enjoy access to international capital markets, in contrast to many of its B rated sovereign peers. The Turkish Treasury has lost no time in capitalizing on surging domestic investor confidence, which has seen rates on domestic paper fall below 57 percent in recent days compared to around 70 percent as recently as September.
Given existing high levels of cash reserves and a robust primary surplus, the Treasury was not relying on foreign borrowing from any source to cover November's redemptions. This issue therefore comes as a welcome addition to its resources and will go some way towards meeting principal and interest payments of $700 million to external creditors this month.
In the wake of such market euphoria, Fitch reiterates that the new government is a necessary but insufficient condition to bring political and economic stability to Turkey. Significant challenges await the new government before year end in the shape of complex negotiations with the European Union (EU) over future accession and the resumption of drawings under the IMF program.
Early indications of how the new government intends to approach these challenges will include the naming of a prime minister and the appointment of an economic team. Changes in the bureaucracy will also be important as will the new administration's attitude towards the newly independent regulatory bodies, notably the bank restructuring agency (BRSA) and the legally independent central bank. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
