Reuters
Forbes.com
January 22, 2004

DAVOS, Switzerland: Most of Iraq’s sovereign creditors are prepared to consider writing off two-thirds of its foreign debt of $120 billion, World Bank President James Wolfensohn said on Thursday.

The United States sees relieving Iraq of its debt as key to reviving the war-ravaged but oil-rich country’s economy and Washington’s special envoy James Baker has visited Europe, Japan, China and the Middle East in search of ways to reduce the burden.

“I talked to him the other day. It looks as though most of the players are prepared to consider a write-off of 66 2/3 (percent) of the debt,” Wolfensohn told CNBC Television in the Swiss ski resort of Davos, where the World Economic Forum is holding its annual meeting.

“He has not gotten contractual assurances but he seems reasonably confident that a Paris Club-type reconstruction is possible and that is an important first step for Iraq.”

The Paris Club includes 19 creditor states with claims of some $40 billion on Iraq.

Its president, Jean-Pierre Jouyet, has said Iraq’s needs would have to be assessed by the International Monetary Fund and that official authorities must be in place to sign a debt-relief agreement. However, he has said he believes a deal can be reached by the end of 2004.

Saudi Arabia said on Wednesday, after talks between Baker and de facto Saudi ruler Crown Prince Abdullah, that it was ready to discuss a big cut in the $30 billion it says it is owed by Iraq but that it wanted to see a sovereign Iraqi government in place before any deal.

Wolfensohn said even a debt reduction of some $80 billion would not make Iraq viable and about $52 billion was needed for reconstruction.