Moody’s said that Iraq's (Caa1 stable) pace of structural reforms will remain slow due to credit challenges that limit policy effectiveness, constrain the government's capacity to respond to external and domestic shocks and weigh on economic competitiveness.
Alexander Perjessy, a Moody’s Vice President—Senior Analyst, said, “Iraq has made slow progress on its structural reform agenda, which includes enacting laws and developing institutions to support public financial management.”
Perjessy said that attempts to diversify the economy remain a challenge, adding that obstacles to the growth of private non-oil industries include poor infrastructure, an inefficient banking system as well as unstable electricity supply and weak control of corruption.
Iraq’s sovereign credit profile is supported by the country’s large economy, its substantial natural resources wealth and its high growth potential support, however, this potential is limited by the slow pace of rebuilding infrastructure and productive capacity following years of conflict, said Moody’s.
Additionally, the government also has substantial financial reserves, which provide a buffer against fiscal and external shocks when other sources of funding are constrained, nevertheless, growth potential is limited by the slow pace of infrastructure and productive capacity rebuilding following several years unrest.