December 19, 2005
The Government of Iraq announced that it has signed a bilateral agreement with Austria canceling the equivalent of $2.1 billion of Iraqi debt, amounting to 80 percent of Austria’s claims against Iraq. The agreement with Austria was signed on December 13. The bilateral agreement implements the Agreed Minute concluded in November 2004 between Iraq and 18 Paris Club creditor countries.
Iraq has already signed similar bilateral agreements with Canada, Italy, Belgium, and Japan earlier this year, while the United States cancelled 100 percent of its claims against Iraq in December 2004.
Prior to this agreement, the claims of the Austrian government against Iraq totaled approximately $2.6 billion. When fully phased in, the agreement signed today will reduce this debt stock to approximately $500 million. The debt reduction will take effect in three installments. Approximately $800 million was cancelled at the time of signing the bilateral agreement; a second installment of approximately $800 million of debt cancellation will automatically become effective upon the signing by Iraq of a formal stand-by arrangement with the International Monetary Fund (expected by the end of the year); and a final installment, equal to approximately $500 million, will automatically take effect upon completion of the stand-by arrangement. The residual debt stock will be repayable over a 23 year period with six years of grace on principal payments. No principal or interest will be payable during the first three years.
“Iraq appreciates the constructive approach taken by Austria throughout the negotiations of this agreement,” Iraq’s Minister of Finance Ali A. Allawi said. “Iraq welcomes the conclusion of another bilateral agreement implementing the Paris Club Agreed Minute.”
The other countries comprising the Paris Club creditors of Iraq are Australia, Denmark, Finland, France, Germany, the Republic of Korea, the Netherlands, Russia, Spain, Sweden, Switzerland and the United Kingdom. Bilateral agreements between Iraq and each of these countries are expected to be signed in the coming weeks.