Moody's Investors Service expected the $53bn energy deal, which the Iraqi government plans to sign with Exxon Mobil and PetroChina, to boost economic growth and government finances, as well as to support the country's external position and strengthen foreign currency reserves. It also anticipated the construction phase of the project to boost non-oil growth and employment. It estimated Iraq's fiscal surplus at 6.5% of GDP in 2018 and forecast the fiscal balance to shift to a deficit in 2019 and 2020, and for the public debt level to increase from 51.5% of GDP in 2018 to around 55% of GDP in 2020 amid moderate oil prices. It also projected foreign currency reserves to decline over the next two years from a peak of around $60bn at end-2018. However, the agency expected that, beyond 2020, the completed project will increase the country's oil and natural gas production capacity, boost its export volumes, and add the equivalent of about 4% of GDP annually to government revenues and export receipts. It noted that the deal will raise production at two southern oil fields from around 125,000 barrels per day (b/d) currently to 500,000 b/d, and will generate $400bn in additional government revenues over a 30-year time horizon. It added that the agreement includes building new storage tanks, pumps, pipelines and offshore terminals that will simultaneously increase Iraq's oil export capacity. Further, Moody's cautioned that higher oil production could reduce the urgency of reforms aimed at decreasing vulnerability to lower oil prices, which remains a constraint on Iraq's credit profile.
Source: Moody's Investors Service