NEW YORK: Fitch has upgraded Turkiye’s rating to “B+” from “B”, saying tighter approaches to mon­e­­­tary policy were helping combat inflationary trends.

The change comes after Turkiye’s central bank left its key interest rate steady in February.

“Upgrade reflects increased confidence in the durability and effectiveness of policies implemented since the pivot in June 2023,” Fitch said on Friday. It also upgraded the country’s outlook to positive from stable.

After President Tayyip Erdogan’s re-election in May, Turkiye abandoned its unorthodox low interest rate policy in favour of tightening. It has raised its key rate to 45 per cent from 8.5pc since June.

Inflation subsequently rose to an annual 67.07pc in February, exceeding expe­c­tations and keeping up the pressure for tight monetary policy. Econo­mists expect it to decline to around 40pc by the end of the year. Turkish Finance Minis­ter Mehmet Simsek said the rating upgrade was a concrete result of the government’s economy progr­a­m­me as well as its rule-based and predictable policies.

“Macrofinancial stability will be further streng­thened and our credit rating will increase in H2 with disinflation, narrowing current account deficit and budget discipline,” Simsek added on social media platform X.

Turkey is expected to take more policy steps to cool inflation after local elections on March 31, setting the stage for more pain for Turks already struggling after years of soaring prices, according to data and some economists.

Published in Dawn, March 10th, 2024