S&P keeps Iraq's sovereign credit rating in high-risk category, outlook negative

BASRA, Iraq — International credit rating agency Standard & Poor's left Iraq's sovereign credit rating unchanged, keeping the country in the high-risk bond category. The decision reflects what the agency described as Iraq's very narrow safety margin in meeting its credit obligations and its exposure to fundamental risks. S&P removed Iraq from its negative watch list but set the outlook at "negative" for the next 6 to 12 months, warning that the possibility of a downgrade remains high even as short-term risks of the worst-case scenarios have not yet materialized. The agency cited three main factors behind the assessment: rising geopolitical threats linked to conflict risks in the Middle East, disruptions to trade routes through the Strait of Hormuz in the Persian Gulf, and the fact that 95% of state revenues depend on a single maritime outlet. The economy's continued heavy dependence on the oil sector was also listed as a key vulnerability. The sub-investment-grade rating restricts global funds and major banks from investing in Iraqi sovereign bonds, forcing the government to rely on external borrowing at higher interest rates. It also discourages foreign investment and adds pressure on the Central Bank of Iraq's foreign currency reserves, which poses risks to the stability of the Iraqi dinar against the US dollar. No further details on the rating action were immediately available.