Reuters
Forbes.com
November 6, 2003

Washington: The International Monetary Fund said on Thursday it was still assessing how much of Iraq’s debt should be forgiven and what level of debt would be sustainable for the country drained by conflict and isolation.

“I would say we are still in the process of collecting both information regarding the extent of the total obligations, as well as making an estimate with regard to what is potentially a debt sustainability, a level that would be sustainable, from a debt sustainability point of view,” IMF spokesman Tom Dawson told a regular news briefing.

He said it is traditionally the fund’s responsibility to provide input to the Paris Club – a grouping of industrialized countries that consider sovereign debt rescheduling and cancellation – and other groups of creditors.

He said it would not be appropriate for the fund to disclose estimates right now.

World Bank president James Wolfensohn has estimated that Iraq’s total debt load is around $120 billion and that at least two-thirds should be forgiven to give the country a good start at rebuilding.

The former Yugoslavia was given a two-thirds debt write-off after Slobodan Milosevic was ousted.

The Group of Seven rich nations has said they want a deal by the end of the 2004 on restructuring Iraq’s debt.

The IMF’s mission chief for Iraq, Lorenzo Perez, told the Madrid donor conference on Iraq last month that the country would need “generous external debt relief” to achieve sustainable debt service payments in the future.

He said while the economy should make a strong recovery in 2004 and the fiscal situation should improve, public finances will be strained for some years.

The IMF has said it could provide between $2.5 billion and $4.25 billion in assistance to Iraq over a three year period.

Initially, it could make $850 million available for emergency post conflict assistance, followed by amounts between $850 million to $1.7 billion annually.