Does the rise in oil prices affect the upgrade of Iraq's sovereign rating?

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[size=52]Does the rise in oil prices affect the upgrade of Iraq's sovereign rating?[/size]

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  Baghdad: Mustafa Al-Hashemi
A year and a few days after Iraq obtained its last credit rating from Fitch International at B-, two economic experts see the possibility of raising the rating to a higher degree, especially after the payment of Kuwait’s debts and the recent rise in oil prices to more than $100 a barrel. .

On March 24 last year, Fitch International, the international credit rating agency, revised the future outlook for Iraq to stable at B-, but the dynamics of the political economy still hinder policy-making, despite the 18.5% devaluation of the dinar and financial and economic reforms. It points to some possibilities for taking measures to put Iraq's finances on a more sustainable footing.


Gross domestic product
According to the Trade Economics website, the classification issued by Fitch reported the gross domestic product data for Iraq that it actually amounted in the year 2020 to 167.22 billion dollars.
In this regard, the economic academic Dr. Majid Al-Baydani said: “Raising the rating will be possible if the economic imbalances are confronted and modified, by eliminating dependence on import commodities, strengthening governance, reducing high risks, developing the banking sector, and increasing foreign currency reserves. in the central bank and to reconsider the interest rate on government debt.”

The importance of approving the budget
Al-Baydani added that “the approval of the 2022 budget is necessary to show aspects of government spending, job rates and retirement in the public sector, as well as benefiting from the rise in oil prices and the adjustment of the exchange rate, which led to the devaluation of the dinar against the dollar by increasing job opportunities in the private sector.”
In a previous review of Iraq's credit rating, Fitch had confirmed, "We expect reserves to decline in 2022 to $48 billion, and Iraq's reserves will remain stronger than the 4.3-month average B `" ratio of 4.3 months from CXP and significant in relation to the expected consumption of government debt. amounting to 4.7 billion US dollars.
Al-Baydani stressed “the need to benefit from international conditions by increasing reliance on Iraq’s available capabilities in terms of agriculture by adopting groundwater and increasing the agricultural plan and keeping it away from the effects of reducing Iraq’s share of the water entering it,” opening the way for the private sector, enforcing insurance and retirement laws for its workers, and equalizing the level of wages. between the public and private sectors.”

Increased investor facilities
For her part, economic researcher Lamia Al-Ani said: "Iraq is able to raise the current credit rating to at least B through a number of reforms, which are represented in increasing the granting of facilities to investors (foreign and local) and standing in the face of cases of extortion that they are exposed to."
Al-Ani added that "the reform also consists in restructuring the institutions that have been engulfed by corruption, in addition to restructuring the public banking sector, and rehabilitating its private counterpart to assume its true responsibility in building Iraq's economy, in line with global development in all fields."
She indicated the need to get rid of the uncertainty in expectations because the 2022 budget has not yet been approved, amid calls and proposals directed to Parliament and the government on a large scale to expedite its approval, provided that it does not include a deficit similar to the 2021 budget, as the rise in oil exports compensated for the drop in oil prices. , while spending only increased marginally after strong growth that year.
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