Lin Noueihed/Reuters
Forbes.com
March 16, 2004

Beirut: Iraq’s finance minister said on Tuesday Baghdad hoped to finalise a deal to ease its massive debts this year, despite splits among creditors over how much debt relief to grant a country so rich in oil.

Kamel al-Gailani, who held talks with an IMF team in Beirut this week, urged creditors to forgive or restructure the estimated $120 billion owed by the war-ravaged country.

“The world saw what happened in Iraq: 35 years of damage,” he told Reuters. “Iraq is a rich country, but to return to the international community as soon as possible we need a substantial reduction.” He declined to say how much.

The International Monetary Fund is due to present its final assessment of Iraq’s total debts in April, based on submissions by creditors, but the Iraqis have been reluctant to recognise debt without their own documentation.

The United States has sent special envoy James Baker to the Gulf to push the complicated process along.

But disagreements remain over whether to grant the substantial debt reduction wanted by the Group of Seven rich nations. The G7 hopes for a deal by the end of the year, with backing from the Paris Club of sovereign creditors.

Some 50 countries hold half Iraq’s debts, a wider group than the usual case of rich G7 states holding debts of poor nations.

Gailani said Iraq would soon finish gathering data on its debts, much of it lost or destroyed in post-war looting.

“I think in the near future the next step will be bilateral meetings with the Paris Club to exchange this information to see if it is identical with the creditors or not,” he said. “We are thinking to finalise everything in 2004.”

A European Treasury official said earlier on Tuesday the Coalition Provisional Authority had appointed Ernst & Young to help sort out records.

Gailani, Iraqi Central Bank Governor Sinan al-Shibibi and other top finance officials discussed programmes to deal with foreign debt in technical meetings with an IMF team in Beirut.

Gailani said that series of meetings was likely to continue well into the year.

Iraqi cash trickling back

Gailani said Iraq was finalising details with Lebanon over returning some $500 million of Iraqi cash frozen in 17 local banks.

“We’ll have it in partial transfers, $100 million every two months when some technical issues are finished,” he said. “We’re trying to keep $100 million here in Lebanon because we have claims from Lebanese companies and traders.”

Jordan has paid back more than $100 million of about $500 million in frozen Iraqi assets.

Gailani hoped to discuss Iraqi funds held in Damascus with the Syrian economy minister on the sidelines of an Iraq Economic Forum opening in Beirut on Wednesday.

Baghdad has said Syria owes it up to $3 billion in Iraqi cash, but Damascus says the amount is in hundreds of millions.

Gailani said a new taxation law was ready and authorities would begin collecting corporate and personal income tax, with a 15 percent ceiling, within one or two months.

Iraq also hopes to begin collecting a five percent customs levy at the start of April after a three-month delay, he said.

The minister said Iraq was trying to boost economic growth, which he declined to forecast, by encouraging new private banks, and urging banks to open all over the country and provide microcredit to small firms to help the private sector develop.

“We have lots of proposals in the central bank, maybe from 27 banks, Iraqi and joint ventures,” he said.