Robert Smith
Gulf Daily News, Bahrain
June 7, 2003

Banks in Bahrain are looking at how to recover millions of dollars in unpaid loans to Iraq. They want a deal over the debts before even considering investing in rebuilding the country, says a top official.

The loans were to state-owned agencies to finance legitimate schemes, says Arab Banking Corporation (ABC) president and chief executive Ghazi Abdul-Jawad.

These included the purchase of essential goods and services on behalf of the Iraqi people.

Now banks from Bahrain and elsewhere are working on ways to recover these debts before considering investing in post-war reconstruction.

“Before any bank – be it ABC or any other – commits new moneys we have to come to an agreement that is equitable and fair on how we resolve the debt that is on the books,” Mr Abdul-Jawad told the GDN in an exclusive interview.

“What makes the case even more difficult is that after liberation there is not yet a functioning administration.”

ABC would like to see a strategy approved by all those banks with exposures in Iraq.

One potential option is conversion through debt for equity. That means banks would write off part of Iraq’s debts in exchange for being given a banking operation in that country.

“As a bank who has been dealing with Iraq in the past we need somehow to reach an understanding on the exposures that we have to Iraq,” said Mr Abdul-Jawad.