The arrest and imprisonment of opposition politicians last week could pose a risk to confidence in Türkiye's economy and the stability of the exchange rate, says S&P Global Ratings (S&P) in a bulletin released yesterday.
Since the end of 2023, authorities in Türkiye have made considerable headway in convincing households to shift their savings out of gold and foreign currency and back into domestic currency. This has boosted the country's foreign exchange reserves and encouraged disinflation, supporting S&P’s rating on Turkiye (BB-/Stable/B; Turkiye national scale: trAA+/--/trA-1+ ).
However, the return of political tensions could be a setback to these reforms. Recent central bank emergency interventions have included direct foreign currency sales, liquidity and forwards operations, and an emergency increase in the overnight lending rate.
S&P said, “We believe the second-round effects of rising uncertainty on household spending, capital inflows, the exchange rate, growth and inflation can be material, interrupting what had up until recently been a notable decline in deposit dollarisation and inflation.
A Turkish court on 23 March 2025 imprisoned Istanbul mayor Ekrem Imamoglu, President Tayyip Erdogan's main political rival, pending trial on corruption charges. The arrest led to widespread protests.