Turkey says may cancel S&P contract at anytime

International credit rating agency S&P cut the outlook on Turkey's BB sovereign credit rating earlier this month, saying risks to its creditworthiness had risen as a result of its high debt and worsening terms of trade as demand for its exports weakens.

“If necessary, we may cancel the contract with the S&P at any time. There is no such decision for now, but we can take this step in the future. [And] we don't have a contract with Fitch [credit rating agency],” Babacan said.

Prime Minister Recep Tayyip Erdoğan has harshly criticized S&P for its decision to change its outlook on Turkey from positive to stable. Erdoğan had said S&P cut the country's sovereign rating outlook from positive to stable because it knew it had to upgrade the rating -- something it did not want to do for ideological reasons -- after it had kept the outlook positive for some time.

Speaking to the press in Pakistan's capital İslamabad on Tuesday, Erdoğan stated that Turkey may create its own credit rating agency. In addition, Babacan commented on the prime minister's statement and said Turkey has the legal infrastructure to create a credit rating agency.

Other than S&P, Moody's rates Turkish credit Ba2, two notches below investment grade, with a positive outlook. Fitch ranks Turkey BB+, just one notch below investment grade.