The US risk rating agency Moody's Investor Service wants to see more progress on structural reforms as an underpinning for economic recovery before upgrading its ratings, said a senior analyst for the agency at an Istanbul conference in mid-May. A senior IMF official said at the same conference that prospects for the economy are improving. Risk rating downgrades from Moody's contributed to the foreign exchange and general economic crisis in first-half 1994.

Senior Turkish officials from ministerial level down say they expect upgrades soon in the country's international risk ratings. Subsequent relegations after the January downgrades reduced Turkey to sub-investment grade. Moody's currently rates Turkey at Ba3, and S & P at B+, compared with the BBB rating Turkey enjoyed until May 1993.

IMF European department assistant director Tom Reichmann highlighted the turnaround of the current account, which showed a $6,000 million surplus in 1994. He said 'With the existing pipeline of long-term capital inflows, some re-opening of access to capital markets, and short-term inflows that are likely to be attracted by the tight monetary policy that is being implemented, Turkey should be able to honour, once again, the large debt amortisations that are due this year.'

The central bank has asked another US rating team Duff Phelps to carry out its own credit assessment of Turkey. Turkish bankers say the Duff Phelps team will announce its rating by the end of June.

Turkey deserves the upgradings because of stabilisation in the financial markets, and an improvement in the budget and external balances, achieved through an IMF-endorsed recovery programme, officials argue. In particular, they point to the signing of an oversubscribed, $500 million loan by the treasury in April.

Progress is also being made with privatisation, a central concern of Moody's, said David Larson, senior analyst responsible for Turkey at Moody's sovereign risk unit speaking at the Turkey: Towards 2000 Euromoney conference held in Istanbul on 15-16 May.