Turkey’s lira fell to an all-time low after S&P Global Ratings downgraded the country’s debt on concern about an increase in political risk after a failed coup last week and the government declared a state of emergency as it pursues those responsible.
The currency slumped to as low as 3.0973 against the dollar before falling 1.5 percent to 3.0898 on Wednesday. Stocks earlier capped the steepest three-day sell off in three years and bonds tumbled, sending the yield on 10-year notes to the highest since May.
President Recep Tayyip Erdoğan declared a three-month state of emergency in a televised address after a day of meetings with top generals on the National Security Council, and then ministers in cabinet. Since the collapse of the attempted putsch on Saturday, authorities have arrested thousands of army officers, judges and prosecutors, and embarked on a purge of other institutions such as universities.
S&P cut Turkey to BB, two steps below investment grade, from BB+ with a negative outlook, saying the move reflected the further fragmentation of the political landscape after last week’s attempted coup. This will undermine the country’s investment environment, growth and capital inflows into its externally leveraged economy, it said. S&P’s downgrade comes two days after Moody’s Investors Service put the sovereign on review for a possible downgrade.
The failed overthrow attempt has led President Recep Tayyip Erdoğan to crack down on his opponents. About 60,000 people have been detained, suspended, fired or stripped of their professional accreditation since the coup, according to Bloomberg estimates. An announcement will be made after meetings with National Security Council, ruling AK Party government ministers and cabinet.
The financial situation is not good, but I am more worried for the 60,000 detainees and how many can become missing persons.