June 17, 2003
WASHINGTON: Two U.S. lawmakers on Tuesday introduced a bill that would require the United States to persuade Iraq’s creditors, including the World Bank, IMF, France and Russia, to cancel or reduce the Iraqi debt.
If approved, the Iraqi Freedom From Debt Act, which has bipartisan backing, would push the U.S. Treasury to use its influence at the International Monetary Fund and World Bank to “cancel or radically adjust downward” Iraqi debt owed to them.
The bill, put forward by Congresswoman Carolyn Maloney, a New York Democrat, and by Congressman Jim Leach, an Iowa Republican, would also instruct President George W. Bush to urge France, Russia and all other public and private creditors to cancel or reduce debt owed by Iraq.
U.S. officials have repeatedly said Iraq will require some form of forgiveness on debts estimated to be between $60 billion and $130 billion to help the country get its economy up and running again after the war and rule of Saddam Hussein.
But calls for debt relief have been met with resistance from countries like Russia which is estimated by the charity Oxfam to be owed $9 billion by Iraq, a much larger amount than the estimated $2.1 billion owed to the United States.
Some countries also feel that as they did not support the U.S.-led war they should not be required to forgive debts.
The U.S. Congress is reluctant to approve new American funds to rebuild Iraq if the money is used to repay debts.
“Nothing would be more ironic or reprehensible than for American and other international assistance in the wake of the war to be transferred to pay off Iraq’s debt to countries such as France, Germany and Russia, which have sold sophisticated arms to Iraq and helped build ostentatious palaces for Saddam Hussein,” said Congressman Leach.
The Paris Club of creditors is assessing how much money Iraq owes to its members and the IMF is trying to work out the size of Iraq’s debt to countries outside the Paris Club.
Discussion about Iraqi debt is expected to be a contentious subject going forward. In comments that might inflame Russian sensitivities on the subject, U.S. Undersecretary of State for Economic Affairs Alan Larson said on Tuesday Iraq’s rouble debt to Russia will automatically be reduced.
“There is an arrangement … in the Paris Club that is designed to translate rouble-denominated debt, which is not, at this stage, worth 100 percent on the face value,” Larson said.
Iraq owes $87 million to the World Bank and around $75 million to the IMF. The World Bank said the focus should be on larger creditors while the IMF declined to comment.
“The debt Iraq owes the World Bank is negligible compared with the country’s total external debt,” Damian Milverton, World Bank spokesman told Reuters.
“Accordingly it is the bilateral and commercial creditors of Iraq who need to decide whether they will offer any debt forgiveness. We will continue to move ahead with assessing Iraq’s most urgent reconstruction needs in areas such as water, power, health and education.”
World Bank sources also said there are other countries looking for debt forgiveness that are in a worse economic shape than Iraq and which do not have the huge oil reserves expected to be used to pay for much of the rebuilding effort.
U.S. Treasury spokesman Tony Fratto also said debt is not the top priority as far as Iraq is concerned.
“We’ve agreed among our Group of Seven counterparts that Iraq will not be required to make payments on its debt until the end of 2004 at the earliest,” Fratto told Reuters.
“What is an immediate concern is … putting in place a fiscal budget and straightening out the currency.” (Additional reporting by Jonathan Wright)
Categories: Iraq's Odious Debts, Odious Debts
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