Nations to write off much of Iraq’s debt
November 21, 2004
PARIS – Major economic powers agreed Sunday to write off more than $31 billion in debt for Iraq in a deal that boosted U.S. efforts to help put the Iraqi economy back on its feet.
Under the agreement, the Paris Club of 19 creditor nations will write off 80 percent of the $38.9 billion that Iraq owes them, group chairman Jean-Pierre Jouyet said. The Paris Club includes the United States, Japan, Russia and European nations.
Iraq owes another $80 billion to various Arab governments. A clause in the agreement gives the Paris Club the option to suspend part of the debt reduction if it were not matched by Iraq’s other major creditors – led by Saudi Arabia and Kuwait.
The United States had been pressing for up to 95 percent of the Paris Club debt to be lifted. Iraq has said its foreign debt was hindering postwar reconstruction, already struggling amid the country’s persistent insurgency.
Iraq’s finance minister, Adel Abdul-Mahdi, hailed what he described as a “historic agreement.”
“This money is needed for Iraq not only because Iraq is a ruined country but because Iraq is an important player internationally,” he said after the deal was signed in Paris. “What will happen in Iraq will effect politically and economically the Middle East and the world.”
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The deal represented a considerable concession from France, just as French President Jacques Chirac’s government is pushing to rebuild ties with the Bush administration that were damaged by disagreements over the U.S.-led Iraq war. France opposed the invasion that toppled Saddam Hussein.
Treasury Secretary John Snow praised the deal as a major step in the rebuilding of Iraq.
“This is a real milestone, and it shows the trans-Atlantic alliance remains a strong force for good in the world,” Snow said during a meeting of finance officials in Berlin.
Jouyet, at a news conference in Paris, said the debt reduction plan would work in three phases, with 30 percent of the debt being written off immediately.
Another 30 percent will be canceled when Iraq agrees on a reform program with the International Monetary Fund expected in 2005. The third and final portion, representing 20 percent of Iraq’s debt to the Paris Club, will be canceled in 2008, once Iraq has completed its three-year IMF program, Jouyet said.