Fitch Ratings affirmed at 'B-' Iraq's long-term foreign currency Issuer Default Rating (IDR), with a 'stable' outlook. It noted that the ratings are supported by Iraq's high GDP per capita, elevated level of foreign currency reserves, low debt servicing costs, and international financial support. But it said that the ratings are constrained by the country's exposure to the volatile oil sector, weak governance, elevated political risks and an underdeveloped banking sector. It noted that the fiscal and external positions remain at risk of another drop in oil prices, given that the hydrocarbon sector accounts for 90% of Iraq's public revenues and for almost all of its export receipts. It expected the fiscal balance to post a surplus of 3% of GDP in 2018 due to higher oil receipts, following five years of budget deficits. But it anticipated a budget deficit of about 2% of GDP in 2020, as it forecast oil prices to drop from about $70 p/b in 2018 to $57.5 p/b in 2020, and due to increases in investment and current spending. It added that a rise in reconstruction spending could put additional pressure on the budget. In parallel, it forecast the public debt level to decrease from 50% of GDP at the end of 2018 to 48.7% of GDP at end-2019, supported by the expected budget surplus and higher nominal GDP. But it projected the debt level to increase to 50.4% of GDP at end-2020, as oil prices decline again and a budget deficit re-emerges. Further, it projected the Central Bank of Iraq's foreign currency reserves to average $54bn during the 2018-19 period.
Source: Fitch Ratings