Iraq Moves to Strengthen Sovereign Credit Rating amid Economic Overhauls

Iraq is entering a pivotal phase of economic transformation, with fresh fiscal and administrative reforms aimed at securing an upgrade to its sovereign credit rating, according to a new report by the London-based International Center for Development Studies (ICDS).

The report outlines how Iraq is positioning itself to gain international confidence by increasing foreign direct investment and enacting structural reforms.

Led by Prime Minister Mohammed Shia’ Al Sudani, the Iraqi government attracted over $87 billion in foreign investments in 2024 alone. That figure is projected to rise to between $120 billion and $150 billion by 2029, as international capital flows into key sectors including energy, petrochemicals, agriculture, and religious tourism.

Credibility through Reforms and Transparency

ICDS notes that Iraq’s economic strategy is gradually moving away from its traditional dependence on oil. The government has intensified efforts to bolster financial governance, fight corruption, and reinforce the independence of the central bank. These efforts have helped stabilise the dinar and curb inflationary pressures.

Transparency in public finance has also improved. The report highlights the government’s publication of detailed annual reports on public revenues and expenditures, along with the revision of over 200 legislative measures in the past two years—aimed at improving the business environment and curbing entrenched corruption networks.

Strategic Engagement with Global Institutions

Iraq is reportedly close to finalising advisory agreements with two international firms—one to support the Trade Bank of Iraq (TBI) in aligning with global compliance standards, and another to lead a strategic communications campaign to enhance Iraq’s economic image and creditworthiness in the eyes of major ratings agencies including S&P, Moody’s, and Fitch.

Research institutions such as International Center for Development Studies (ICDS), can play a vital role in helping Iraq formulate sovereign risk assessments, develop sustainable financing frameworks, and enhance external economic relations.

Encouraging Sectoral Indicators

Iraq’s agricultural output, especially wheat production, has seen a 15% increase over the past three years. Petrochemical exports rose by 10% in 2023. Religious tourism has also expanded, with a more than 20% rise in foreign visitors—highlighting the sector’s growing potential as a non-oil revenue stream.

Despite Iraq’s current low credit ratings—B- from both S&P and Fitch, and Caa1 from Moody’s—the report points to high levels of foreign currency reserves, fiscal reforms, and growing financial transparency as positive factors that may support future upgrades.

Risks and Recommendations

The report cautions that Iraq’s credit rating trajectory will remain contingent on political stability, the rule of law, and the mitigation of regional tensions. Accelerated implementation of major infrastructure and economic projects, aligned with a clearly defined five-year plan, is also deemed essential.

ICDS urges the Iraqi government to deepen its engagement with international financial institutions, leveraging technical assistance and concessional finance to reduce borrowing costs and create a more resilient and inclusive growth model.