Iraq's Odious Debts

Iraq debt write-off bitter pill for developing nations

Gulf Daily News
July 2, 2004

It is hard to argue against debt relief for struggling economies but experts say US efforts to forgive most of Iraq’s $120 billion would be a slap in the face for nations still paying old dictators’ bills.

Democratic governments of countries like Russia, Brazil and Argentina have been forced to assume hefty debts incurred under totalitarian or military regimes.

Timely debt repayment came at a high human cost. Budget constraints meant governments had to cut social programmes and rein in already flimsy safety nets.

Africa, ravaged by poverty and an Aids epidemic, is rife with nations that have all but collapsed under the burden of debts accumulated by authoritarian leaders.

“The Bush administration’s effort to have Iraq’s debt canceled really underscores the double standard of the United States toward the issue of indebtedness, particularly for developing countries,” said Salih Booker, executive director of Africa Action, an advocacy group based in Washington, DC.

Washington contends Iraq is different, saying its debts were amassed during Saddam Hussein’s ruthless rule and so should not apply to the entity created to take over after US occupation.

The Russians, to whom a large chunk of Iraq’s debts are owed, know first-hand that regime change is not always accompanied by write-offs. Post-Soviet Russia is still working off loans piled up during its totalitarian days.

In Latin America too, democratically elected governments have had to take on the debts of their military predecessors.

Sovereign creditors have already started jostling for position in anticipation of heated negotiations on the issue.

The US wants to wave away up to 95 per cent of Iraq’s outstanding debt, while Japan and Britain have talked about forgiving 80pc. France, which opposed the US-led war on Iraq and which stands to lose the most from a major debt write-down, has urged only a maximum 50pc cancellation.

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