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Agreement on Debt Relief for Iraq Welcomed
The Paris Club has agreed to a comprehensive debt arrangement for Iraq which allows for debt relief in the amount of $31.1 billion (80% of obligations). The agreement came on November 21 after intense negotiations. “This is not only good news for Iraq, this is also good news for transatlantic relations,” German Ambassador Wolfgang Ischinger said after German Finance Minister Hans Eichel and US Treasury Secretary John Snow came to an agreement. “It is an important signal of Western cohesion and resolve that we have now reached agreement on the Iraqi debt question. This is the spirit in which we should face other challenges, such as Iran, and the Middle East conflict,” Ischinger said. US Treasury Secretary Snow said, “Germany has taken the lead on the Iraqi debt, and they get a lot of the credit,” according to press reports. “It is a good arrangement for Iraq, and it will also show how the world community can come together in a very cooperative way to address a problem.” The debt relief was granted in light of Iraq’s unusual situation, which is comparable with that of no other Paris Club debtor nation. Iraq’s ability to service and repay its debt is severely limited because of this special situation. The debt relief should help Iraq in the long term restore its ability to carry debt. The relief will take place in three stages and is tied to the agreement and successful conclusion of an IMF standard program planned for 2005. Despite its current strained budget situation, the German Government, with its portion of this relief at $5 billion, is providing a significant contribution to the economic reconstruction of Iraq. Germany is one of Iraq’s largest creditors, with claims in the amount of $6.2 billion. The claims of the Paris Club amount to about $39 billion (including interest) and represent some 33% of the total claims against Iraq of $120 billion. Other creditor states hold some $65 billion in claims (55% of total claims) and private creditors some $16 billion (13% of total claims). Iraq has obligated itself in the Paris Club agreement to reach comparable debt arrangements with all its other creditors. November 24, 2004
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