Baghdad: Standard and Poor’s (S and P) credit rating Agency affirmed that the Iraqi economy is steadily moving towards strengthening fiscal sustainability despite regional challenges.

According to National Iraqi News Agency, the Agency, in its February 2026 report, which affirmed Iraq’s rating at (B-/B) with a positive outlook, predicted that increased oil production during 2026 would provide crucial support for Iraq in the face of global price volatility and surrounding geopolitical tensions.

On the fiscal management front, the report commended the government’s successful implementation of its spending control policy, which directly led to a reduction in the fiscal deficit to 2.5% of GDP in 2025, a significant improvement compared to the 2.7% recorded in 2024.

The Agency also highlighted the country’s financial strength, noting that Iraq is expected to maintain average international reserves of approximately $100 billion until 2029, representing nearly 35% of GDP. This figure far exceeds the size of the public sector’s external debt, thus bolstering international confidence in the country’s financial solvency.

The Standard and Poor’s report further explained that inflation rates in Iraq remain low and stable compared to regional standards, with average annual inflation projected to decline to 1.9% in 2025, down from 2.6% in 2024.

The Agency believes that “this stability is supported by improved tax collection mechanisms through the introduction of new digital systems in the customs sector, along with effective measures taken by the Central Bank of Iraq in the area of compliance to enhance transparency and governance and develop channels for foreign currency flows, in addition to the intelligent use of monetary policy tools and the restructuring of the banking sector, which will in turn lead to raising the overall efficiency of the national economy.”