One of our family elders used to say, “When things get so crazy, so chaotic in the country, no one even listen to the king’s warnings”. So true… As we go through difficult times, we cannot pay attention to useful warnings and explanations that describe the situation we are in. We cannot focus on what we find important in normal times, nowadays.
Last week, Moody’s once again downgraded Turkey’s sovereign credit rating, putting us in a very interesting group of countries:
Mongolia, Nicaragua, Niger, Pakistan, Swaziland, Tajikistan, Kyrgyzstan, Moldova.
How one can stay calm in the face of this embarrassing situation? Neither the financial system, the real sector nor the trade in these countries is as developed as ours. But the reason for Moody’s decision is quite obvious: complex and unproductive macroprudential measures in the face of Turkey’s increasing external vulnerability. Practices in Turkey described by some analysts as “obstinate” are called “wrong” by rating agencies. It is certain that they make an unsentimental and cold assessment when it comes to assessing governments’ creditworthiness.
Moody’s said in its statement on 27th Maythat it has been closely monitoring Turkey’s credit rating. Considering the fact that, since then, there has not been any changes in the government’s methods of handling the economy, which further worsened the conditions, it was unavoidable that the credit rating would be downgraded again. Last time Turkey had investment-grade rating was 2013. If it were any other time, lowering Turkey’s sovereign credit rating to B3 from B2, a highly speculative rating that only gives the green light to capital movements, would have caused a big commotion. But under today’s circumstances, it looks like a minute detail.
“Giving Confidence Is More Important Than Giving Funds.”
Obviously, the main reason why Turkey’s credit rating has been lowered to B2 level is not just about the lack of reserves. It is also about many decisions, so called “urgent measures”, that do not comply with the market economy as well as practices that are constantly changed and made more complicated with each change. Even those who read the Official Gazette every morning have trouble understanding some decisions.
The complex and contradictory legislative articles related to energy, retail and finance are killing investor enthusiasm.
So, what is the solution? From time to time, the University officers review the bylaws and the regulations they have issued. Because a rule or regulation that has been created to deal with an emergency situation in the past or sometimes under the current administration may become meaningless in the future. Sometimes an article in one regulation can contradict another regulation.
After the elections, the legislation in Turkey must be urgently reviewed and simplified, especially the Decree No. 32, trade and tax legislation, regulations governing retail, e-commerce, banking, non-bank financial institutions.
It should not be forgotten that some problems cannot be solved by technical solutions alone. We need solutions that also address the political and psychological aspects of the problem. The rights that have been taken away in times of financial crises should be returned to their owners after the danger has passed. Otherwise, market rules will be breached, and it will not be possible to ensure stability.