Moody’s says Turkey among most susceptible countries for bond refinancing

Turkey is among countries most susceptible to refinancing risks given the size of its upcoming bond redemptions compared to foreign exchange reserves, Moody’s said.

Low-rated countries with large international bond maturities face significant rollover risk over the coming quarters, the ratings agency said in a report on Monday. Among them are Turkey, Sri Lanka, Honduras and Tunisia, it said.  

“The deterioration in the global economic outlook following the coronavirus outbreak and sharp commodity price declines is triggering significant financial market volatility and risk aversion that few emerging market sovereigns are immune to,” Moody’s said.

Turkey’s net foreign currency reserves have dwindled as the central bank sought to defend the lira. The country’s gross foreign currency reserves stood at $107.7 billion in February, but its net reserves, when subtracting foreign currency it borrowed from banks via swaps, could be as little as $1.5 billion, the Financial Times reported at the weekend.

Concerns over the economic impact of the coronavirus pandemic have sent tremors through financial markets in developing countries. Ratings agency Fitch warned last week that Turkey’s high indebtedness - with around $170 billion in short-term debt payments due this year - made it particularly vulnerable to global market fluctuations.