Iraq Financial/Political Risk

Iraq: risk assessment
Sovereign risk Currency risk Banking sector risk Political risk Economic structure risk Country risk
August 2011 CCC CCC CC C C CC

Stable. Iraq continues to honour its debt commitments, and the Paris Club, Russia and China have agreed to substantial debt write-offs. However, Iraq’s sovereign risk score is still undermined by the slow progress on debt relief with Arab creditors.

Currency risk

Stable. The Central Bank of Iraq oversees the Iraqi dinar’s informal peg to the US dollar, and foreign investors are increasingly seeing opportunities in Iraq, despite ongoing security problems.

Banking sector risk

Stable. Iraq does not have a developed banking sector, and in general banks suffer from poor asset quality and inadequate capitalisation, although recent moves to increase banks’ minimum capital requirements seek to remedy this.
Iraq’s political process has begun to look more certain, and violence targeting civilians is, largely, down. The steady drawdown of US troops may, however, allow some of the insurgent factions to regroup, putting in danger the security improvements of the past two years.Political risk

Economic structure risk

Oil revenue accounts for around 98% of total export earnings and over 90% of budget revenue. This leaves Iraq highly vulnerable to movements in oil prices and to any deterioration in the security situation.