October 1, 2004
Washington: An agreement among the Paris Club group of creditor nations on a write-off of a portion of Iraq’s foreign debt is not imminent but could be achieved by the end of the year, the group’s chairman said on Friday.
Washington has been pushing for a rapid debt deal, and an accord among top industrial nations before the November U.S. presidential election would be good news for President George W. Bush as he campaigns for a second White House term.
But major creditors in the 19-member Paris Club, an informal body that seeks sustainable solutions to the payment difficulties of debtor nations, are still struggling to reach an accord, said the Club’s chairman, Jean-Pierre Jouyet.
“There’s no real progress,” Jouyet told reporters in Washington on the margins of a meeting of finance chiefs from the Group of Seven (G7) rich nations – the United States, France, Japan, Germany, Britain, Italy and Canada.
An agreement on Iraq debt forgiveness at the Paris Club could serve as a benchmark for relief deals with other creditors such as Saudia Arabia, Kuwait and eastern European states. The G7 states are all members of the Paris Club.
A G7 source said a deal was possible by year’s end, but added that the United States was sticking to its view that 90-95 percent of Iraq’s foreign debt should be waived, while France wanted just 50 percent forgiven in the first instance.
“(A deal) is not imminent,” added Jouyet, though he also said that, despite the differences between creditor countries, a Paris Club agreement was possible by the end of the year.
“That’s still the target,” he said, adding that issues such as the time period over which the debt should be repaid needed to be agreed on as well as the amount of debt to be forgiven.
The International Monetary Fund (IMF) puts Iraq’s total pre-war debt at $120 billion, some $40 billion of which is debt and arrears to Paris Club member nations.
France, which opposed the U.S.-led war in Iraq along with with Russia and Germany, argues Iraq has the world’s second largest oil reserves and should not be treated better than improverished African nations with no such natural resources.
The G7 talks take place on the eve of weekend annual meetings of the World Bank and the IMF, the Washington-based leading agency which has been charged with drawing up a post-conflict recovery program for Iraq.
Agreement on economic planning between Iraq and the IMF is a precursor to formal debt relief deals with Paris Club creditors. The IMF said last month Iraq could have an IMF-backed economic program with financing in place by the end of 2004.