Iraq's economy remains under pressure owing to the sharp drop in oil revenues, high and poorly-directed fiscal expenditures, and political paralysis. The Iraqi government and its allies continue to make progress in the fight against the ISIS militant group. They have recaptured some territories such as Ramadi and Fallujah, and are preparing the ground to retake Mosul. The $5.4 billion program agreed by the IMF in July 2016 calls for a gradual fiscal consolidation. We expect, however, significant fiscal and external pressures to persist between 2016 and 2019 owing to lower oil revenues. We are affirming our 'B-/B' long- and short-term foreign and local currency sovereign credit ratings on Iraq. The stable outlook incorporates our expectation that Iraq's large fiscal
