S&P Affirms Iraq at ‘B-/B’ with Stable Outlook

S&P Global Ratings on Friday affirmed Iraq’s sovereign credit rating at ‘B-’ for long-term debt and ‘B’ for short-term obligations in both foreign and local currencies, maintaining a stable outlook.

The agency said the stable outlook reflects its expectation that Iraq’s foreign exchange reserves will continue to comfortably exceed the country’s debt servicing obligations over the next 12 months.

According to S&P, Iraq’s solid external buffers largely mitigate significant risks stemming from political instability, weak institutional frameworks, and limited economic diversification.

The rating underscores Iraq’s continued reliance on hydrocarbon revenues, with oil exports remaining the dominant source of government income and foreign currency inflows. Strong reserve levels provide a degree of financial flexibility, particularly in managing external shocks and meeting near-term debt commitments.

Despite the relative comfort offered by reserve coverage, the agency highlighted persistent structural constraints, including governance challenges and a narrow economic base heavily dependent on oil.

Market observers note that while elevated oil revenues have supported Iraq’s fiscal and external positions, long-term credit strength will depend on meaningful reforms aimed at diversifying the economy, improving institutional capacity, and reducing vulnerability to commodity price volatility.