Fitch maintains a credit rating “risk” to Iraq and warns of the closure of Hormuz

Fitch maintains a credit rating “risk” to Iraq and warns of the closure of Hormuz

2019-07-26 07:42:31

Fitch maintains a credit rating risk to Iraq and warns of the closure of HormuzShafak News / Fitch said that it has maintained Iraq’s credit rating at (B-), a degree of risk, and a stable outlook.

Fitch warned in a statement of the repercussions of the outbreak of hostile actions leading to the closure of the Strait of Hormuz, Iraq, because it lacks other routes of export of oil in the south.

Fitch estimated that the closure of the strait for a month could result in Iraq losing $ 6.5 billion in oil revenues, or nearly 3 percent of GDP.

The tension in the region, on the evening of July 19, after Iran announced the detention of a British tanker in the strait, “to break the regulations on traffic,” hours after a court in Gibraltar, the extension of the detention of an Iranian oil tanker for 30 days.

According to data from the US Energy Information Administration and the International Energy Agency, 21 percent of global crude supplies (21 million barrels per day) pass through the Strait of Hormuz.

“The tightening of US sanctions against Iran is difficult for Iraq because it depends on Iranian electricity and gas imports as inputs to generate electricity,” she said.

In 2018, the high export price of Iraqi oil 33 percent to budget surplus about 8 percent of GDP, after five years of deficit, according to the statement.

Iraq, OPEC’s second largest crude producer, has an average production of 4.5 million bpd.

Government debt in Iraq has fallen to less than 50 percent of GDP in 2018, compared with 66 percent of GDP in 2016.

Foreign currency reserves excluding gold were $ 61 billion at the end of 2018, compared with $ 46 billion in 2017.

The external debt service of the Iraqi government ranges from $ 2.5 billion to $ 2.8 billion annually in the period 2019-2021.

Fitch said lower oil prices were triggering a renewed deterioration in fiscal and balance of payments conditions in Iraq between 2019-2021.

Iraq, an OPEC member, relies on oil revenues to finance up to 95 percent of state expenditure.

It expects Brent crude to hit $ 65 a barrel in 2019 and about $ 61 per barrel in 2020-2021.