Iraq, US hail debt forgiveness

2004-11-22 11:47

Paris - Iraq and the United States on Monday hailed an agreement by a group of creditor nations to write off billions of dollars of debt inherited from the former regime of Saddam Hussein as "historic".

"The historic agreement that we have reached with our Paris Club creditors demonstrates the international community's recognition of the urgent need for Iraq to pursue its massive reconctruction program," Iraq's interim finance minister Adel Abdel Mahdi told AFP.

"Most of the Saddam era claims need to be cancelled before the economic reconstruction programme can proceed and reconstruction, in turn, is an essential condition for stability to return to Iraq," he added.

The Paris Club of 19 creditor countries including the US, Japan, Russia and EU nations on Sunday said its members had agreed to wipe out 80% of the money it is owed by Iraq over three years.

Iraq owes the Paris Club nations some US$40bn, which is about a third of the country's total foreign debt.

"The international community has now come together to support Iraq's economic recovery. For too long has Iraq been a divisive influence in world affairs. It now wishes to be a unifying force," said Mahdi.

US President George W Bush, who was attending a summit meeting in Chile, also welcomed the debt relief deal, and called on other creditors to follow suit.

"The Paris Club agreement represents a major international contribution to Iraq's continued political and economic reconstruction," Bush said in a statement. "I encourage non-Paris Club nations to agree to comparable debt reduction for Iraq."

A statement by the Paris Club said the agreement was intended to ensure Iraq's "long-term debt sustainability." If all conditions are met, Iraq's debt to the club of creditors at the end of the three-year period would be reduced to about $7.8bn.

The announcement of the agreement at the Paris talks had been held up by foot-dragging by Russia. But in Moscow, Russian Finance Minister Alexei Kudrin said it would be "a good thing" if Iraq were enabled to recover so that it could start repaying interest.

Officials said the deal would mean an immediate 30% reduction in the Paris Club debt, followed by a further 30% cut next year on completion of an agreement on an International Monetary Fund reform programme.

A third tranche of 20% would be removed on completion of the three-year programme.

The US had been pushing for an even larger proportion of the debt to be erased, but the final deal was seen as a significant concession by France which had previously argued that too large a reduction would be unfair to poorer nations that are also saddled by debt.

France, which bitterly opposed the war in Iraq, has indicated that it is interested in reinvigorating transatlantic ties after Bush's re-election, and that it will contribute to non-military efforts to re-build Iraq.

- AFP