Fitch assigns first-time B- to Iraq

Fitch Ratings said it assigned a long-term foreign-currency issuer default rating of B- to Iraq, along with a country ceiling rating of B- and short-term issuer default rating of B.

The outlook is stable.

The ratings reflect the political risk and insecurity of the country, which are among the highest faced by any sovereign rated by Fitch, the agency said.

Sectarian conflict has raged with varying intensity since 2003, ISIS militants currently effectively hold three of the 18 provinces, relations with the Kurdish regional government are volatile and governance indicators are exceptionally weak, Fitch said.

Iraq holds the world’s fifth largest oil reserves and significant amounts of gas, the agency said.

The bulk of oil production facilities and infrastructure are away from areas of domestic insecurity. Investment is under way to further raise production capacity, although infrastructure bottlenecks remain a constraint and investment plans were set back by payment arrears in 2014, Fitch said.

Iraq’s fiscal position has deteriorated rapidly since 2013, and Fitch said it forecasts a double-digit fiscal deficit for 2015, owing to lower oil prices, higher military spending and costs associated with civil conflict.

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