Iraq's Odious Debts

Suspension of Iraqi debt repayment eyed

The Asahi Shimbun
May 12, 2003

The government is considering allowing Iraq to temporarily suspend repayment of public-sector foreign debts accumulated under the regime of Saddam Hussein, sources said.

The move falls in line with an expected U.S. proposal to temporarily freeze debt repayment at a meeting of finance ministers of Group of Seven (G-7) nations set for Friday and Saturday in Deauville, France.

As of January 2002, Iraq owed major creditor nations more than $13 billion (1.56 trillion yen). Japan, the biggest creditor among the G-7 nations, is owed about $3.5 billion. By suspending repayment, Tokyo intends to resume government trade insurance for companies doing business with Iraq. This would be impossible as long as Baghdad remains in default.

The government hopes the move will signal its support for a rapid reconstruction of the country, sources said.

The government believes it essential the international community reach agreement on efforts to reconstruct Iraq when leaders of Group of Eight nations meet June 1-3 in Evian, France.

Washington has suggested Iraq’s debts be substantially reduced and repayment deferred to allow income from the country’s oil supplies be used toward reconstruction.

But France and Russia, both major creditors, are reluctant to agree since both have a vested interest in oil business deals signed by the former regime.

Tokyo initially adopted a stance similar to Paris and Moscow.

But the government flip-flopped and plans to support Washington’s plan, which it sees as a practical way to resume Japan’s trade insurance, the sources said.

But sources also warn adjustments would be needed in working out the time frame for the freeze and how to deal with the debts after it is lifted.

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