Ratings agency Moody’s on Friday lowered Turkey’s sovereign credit rating by one notch to B3 from B2, citing rising balance of payment pressures and risks of further declines in the country’s foreign-currency reserves, Reuters reported.

However, the agency also raised its outlook on the country to stable from negative, reflecting a view that the risks at the B3 level are balanced.

“[The] current account deficit will likely exceed earlier expectations by a wide margin, raising external financing needs at a time of tightening financial conditions globally,” the agency said, while estimating that Turkey’s current-account deficit will be close to 6 percent of gross domestic product this year.

Moody’s statement came amid Turkey’s worsening economy and the lira’s 27 percent loss of value against the dollar. The lira ended the year down 44 percent against the dollar in 2021, a slump that helped send inflation soaring to 79.60 percent in July according to official figures. Independent organisations estimate inflation to be around 176 percent.

“The currency remains under pressure, which points to continuing high inflation in the coming months. According to Moody’s latest forecasts, consumer price inflation will still stand at close to 70% at year-end,” Moody’s said.

Although inflation continues to be rampant, Turkish authorities have been confident in their speeches that they will improve the economy with their unorthodox policies, mainly President Recep Tayyip Erdoğan’s stance against interest rates, amid the society’s discontent in the face of skyrocketing food prices. Treasury and Finance Minister Nureddin Nebati is one of these officials, who on Thursday said that the government “didn’t leave citizens alone” against inflation.

“We are continuing our fight against inflation with determination,” Nebati said.

Turkey is rated B by Fitch Ratings and B+ by S&P Global Ratings.

Separately, the Turkish central bank’s net international reserves rose around $2.7 billion to $11.81 billion in the week to 5 August, rising to their highest level since late May, data from the central bank showed on Thursday.