An Agency Expects Iraq's Government Debt Ratio To Drop To 47% This Year
On July 24, 2022
The Independent/- Fitch Ratings Agency expected the government debt ratio in Iraq to decline to 47% in the current world, but
it stated that the debt decline may not be sustainable in light of the political tensions that have restricted public spending.
And the agency said in a report and its independent follower, that
it is expected that “the ratio of government debt in Iraq to GDP will decrease, to record 47% in 2022, from 66% last year,
supported by increased revenues from oil exports whose prices have risen, which is expected to reach $105 a barrel and $85 a barrel in 2023,” noting that
“the decline is the largest for any sovereign country in the Middle East and North Africa.”
The decline is positive for the sovereign's creditworthiness,
but the decline may not be sustainable, as it partly reflects the political tensions that have restricted public spending and reflects the high political risks recorded in Iraq's rating of "B-".
In our confirmation in January 2022 of Iraq's rating,
we stated that a positive rating action could result from a sustained period of high oil prices,
particularly if combined with increased oil production and exports, leading to a downward trend in government debt / GDP and foreign reserves are larger.
However, there remains a great deal of uncertainty about fiscal trends and the outlook for oil prices.
The report explained that Iraq's low debt ratio also reflects its failure to form a government and pass the budget since the October 2021 elections.
This limited spending to 2021 levels until Parliament passed an emergency financing bill on June 6 to allocate $17 billion, or 7% of output GDP, to support food, energy and salaries,” noting that
“the subsidy programs, which were not reformed, were at risk of running out of money due to the high global commodity prices.”