S&P Global Ratings affirmed at 'B-/B' Iraq's long- and short-term foreign and local currency sovereign credit ratings, with a 'stable' outlook. It noted that the ratings are constrained by the country's low financial wealth, weak economic activity and ineffective monetary policy due to the underdeveloped banking system. However, it indicated that Iraq's external debt is low, which reduces the country's vulnerability to external shocks. It expected economic growth to average 2.1% annually during the 2018-21 period, amid political instability, fiscal consolidation and weak non-hydrocarbon sector activity. It added that tackling corruption, as well as strengthening governance, accountability and transparency could support Iraq's economic growth. Also, it said that the $30bn in pledges, loans and investments, which Iraq attracted at the donor conference in February 2018, would boost economic activity in the country, but that this would depend on the timing of disbursements. It noted that the financial stability of Iraqi banks is uncertain, and considered that the risk from the financial sector is a moderate contingent liability to the government. In parallel, S&P projected the current account balance to shift from a surplus of 2% of GDP in 2018 to an average deficit of 2.9% of GDP annually in the 2019-21 period, assuming oil prices moderate. It indicated that foreign currency reserves reached about $48bn at end-2017, supported by the government's Eurobond issuance and higher oil prices, and expected them to remain at this level during the 2018-21 period. It anticipated that the Iraqi dinar's peg to the US dollar will remain in place for several years. 
Source: S&P Global Ratings