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"Fitch" raises Iraq's credit rating after the exchange rate reduction measures
Economy News - Baghdad
Fitch International raised Iraq's credit rating from a negative outlook to stable in the long run.
The rise in Iraq's classification is due to the direct impact of the decision to reduce the exchange rate on the basic economic and financial indicators that focus on reducing the balance of payments deficit and reducing the public debt-to-GDP ratio, as well as reducing the budget deficit as well as maintaining foreign reserves.
The agency indicated that this is based "mainly on the decision to reduce the exchange rate of the dinar by 22.6% during the end of 2020, in addition to the improvement in oil prices and the government's approval of the white paper for economic reform."
She explained that "the reduction in the exchange rate of the Iraqi dinar has led to a reduction in the demand for imported goods and services, which automatically reduced the demand for the dollar and reduced the current account deficit, thus preserving the foreign reserves at the Central Bank of Iraq."
The agency added: "The government’s revenues from oil export sales increased due to the increase in production, the increase in oil prices, and the reduction in the exchange rate of the Iraqi dinar. The government's ability to cover expenditures and public sector salaries has increased, as oil sales in foreign currency constitute about 89% of the budget revenues."
She pointed out that "this is what led to a decrease in the budget deficit expected for the year 2021 relative to GDP from 16.5% to 5%."
"Reducing the Iraqi dinar exchange rate and the subsequent programs to support social groups would increase the financial solvency and creditworthiness of the Iraqi economy and maintain monetary stability, and this is useful in attracting capital and reassuring it towards investment in the Iraqi productive sectors and increasing economic growth opportunities," she stressed.
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