Iraq's Odious Debts

Restructuring of Iraq debt ‘on track’

Joanna Chung
Financial Times (UK)
September 16, 2005

Iraq is poised to announce today the successful completion of the first phase in the restructuring of Saddam-era commercial debt.

The first phase of the deal, orchestrated by JP Morgan and Citigroup, the US banks, involves about Dollars 750m (Pounds 410m) of debt owed to the private sector. About 78 per cent of those who had claims on this amount accepted the offer, which will pay them 10.25 per cent of the principle and past due interest. Only about 2 per cent rejected the terms outright.

“We are very encouraged by the results of this first round of offers,” said Ali A. Allawi, Iraq’s minister of finance. “Iraq’s debt restructuring programme is on track and on schedule.”

This first batch is only a small portion of what is thought to be more than Dollars 20bn in commercial claims. Claims owed to the private sector amount to about 15 per cent of some Dollars 125bn of total outstanding debt that makes Iraq, relative to the size of its economy, one of the most indebted countries in the world. The rest is owed to various creditor nations.

However, it is a rare piece of good news for Iraq and is likely to be welcomed as a sign that the war-torn country is making headway in putting long-standing financial issues behind it. Resolving these debts is also seen as a critical step towards creating a cohesive policy for economic reconstruction in the future.

“It sets the tone for the entire process,” said Nasser Malik, managing director of fixed income at Citigroup.

The commercial claims are from before August 6 1990 when the United Nations imposed sanctions on Iraq. The claimants who have accepted the first round of offers include financial institutions, manufacturing suppliers, and construction and engineering companies that are located in Asia, North America, Europe and the Middle East.

“We are gratified with these first results and Iraq will soon be moving forward with additional cash offers on the same terms,” said Daniel Zelikow, managing director at JP Morgan.

“Iraq aims to put the issue behind it by year-end or early 2006.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s