Iraq's Odious Debts

G7 seeks Iraq debt restructuring by end ’04


September 20, 2003

Dubai: Germany’s deputy finance minister Caio Koch-Weser said on Saturday the Group of Seven wealthy nations wanted to reach a deal by the end of next year on restructuring Iraq’s massive debts.

“We agreed yesterday that as quickly as possible but hopefully by the end of 2004… that we must undertake a restructuring of the debts,” Koch-Weser told a breakfast briefing ahead of a meeting of G7 finance minister in Dubai.

U.S. officials have repeatedly said Iraq will need 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 to overthrow Saddam Hussein.

But calls for debt relief have been met with resistance from countries like Russia, France and Germany, all opponents of the U.S.-led war in Iraq, who lent Iraq a much larger amount than the estimated $2.1 billion owed to the United States.

Koch-Weser said a restructuring agreement by the Paris Club of creditors was important to allow the World Bank to determine how much it could lend Iraq for reconstruction.

He added that he expected much of the rebuilding in the oil-rich country to be financed by loans from institutions like the World Bank as well as regional Arab development funds.

“We assume that due to the fact this is an oil country and on the condition that it undertakes programmes for macroeconomic stability that the international finance institutions can make a significant contribution in the medium-term,” he said.

More details needed

Finance Minister Hans Eichel said Germany needed more information about Iraq’s requirements before making a decision on how much money to give the war-shattered country.

“We don’t know what will be needed in Iraq,” Eichel told a breakfast briefing for media, noting that most international experts had left Iraq after the bombing of the United Nations compound in Baghdad last month.

As the costs of its Iraq occupation soar, Washington is trying to persuade other countries to contribute more troops and cash and has drafted a new U.N. resolution with that in mind.

But Germany, who helped pay for the Gulf War of 1991, has held back on making any specific financial commitments to try to wring concessions on the draft resolution. It seeks a bigger role for the United Nations and a faster handover to Iraqis.

Koch-Weser said he hoped the International Monetary Fund and the World Bank would present a detailed needs assessment report in time for a donors’ conference in Madrid next month.

He said a calculation must be made of income available to Iraq from oil revenues, assets frozen during the rule of Saddam Hussein and cash left over from the U.N.-supervised fund to use oil earnings to buy food prior to the lifting of sanctions.

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