Oil price decline threatens Iraq’s credit rating

Standard & Poor’s Global Ratings placed Iraq’s sovereign credit rating at “B-” on negative watch, warning of a possible downgrade due to the repercussions of regional tensions and declining oil production.

The agency stated, according to a report published by Reuters on Wednesday, that the decision came after a sharp decline in Iraqi oil production to about 1.2 million barrels per day, compared to 4.2 million barrels per day, as a result of the de facto closure of the Strait of Hormuz since late February.

The Iraqi economy is heavily dependent on oil, which accounts for about 60% of GDP, 90% of state revenues, and 95% of export earnings, making any disruption in production or exports a direct impact on the financial situation.

The agency noted that the continued decline could put pressure on public finances and external accounts until 2026, despite Iraq having foreign reserves estimated at about $97 billion, covering about 10 months of external payments, with gold constituting about a quarter of them.

It predicted that the government would have to use these reserves to meet its external debt obligations, including outstanding international bonds worth $2.8 billion.

Standard & Poor’s (S&P Global): An American company specializing in credit ratings and financial analysis, it assesses the creditworthiness of countries and companies. It is one of the most prominent rating agencies globally, and its reports affect the cost of borrowing and investor confidence in the markets.

Shafaq.com