Iraq's Odious Debts

France cancels 80% of its Iraqi debt

Business Wire

December 22, 2006

Baghdad, Iraq: The Government of Iraq today announced that it has signed a bilateral agreement with France canceling the equivalent of U.S. $5.2 billion* of Iraqi debt, amounting to 80% of France’s claims towards Iraq. The agreement with France was signed on December 21, 2005. The bilateral agreement implements the Agreed Minute concluded in November 2004 between Iraq and eighteen Paris Club creditor countries.

Iraq has already signed similar bilateral agreements with Canada, Italy, Belgium, Japan and Austria earlier this year, and the United States cancelled 100% of its claims towards Iraq in December 2004.

Prior to this agreement, the claims of the French government towards Iraq totaled approximately U.S.$6.4 billion. When fully phased in, the agreement signed today will reduce this debt stock to approximately U.S.$1.3 billion. The debt reduction will take effect in three installments. Approximately U.S.$1.95 billion was cancelled at the time of signing the bilateral agreement; a second installment of approximately U.S.$1.95 billion of debt cancellation will automatically become effective upon the conclusion of a stand-by arrangement between Iraq and the International Monetary Fund (expected by the end of the year); and a final installment, equal to approximately U.S.$1.3 billion, will automatically take effect upon the final review of a three-year implementation of stand-by arrangements. The residual debt stock will be repayable over a 23-year period with 6 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 France throughout the negotiations of this agreement,” said Iraq’s Minister of Finance Ali A. Allawi. “Iraq welcomes the conclusion of its bilateral agreement with France implementing the Paris Club Agreed Minute.”

The other countries comprising the Paris Club creditors of Iraq are Australia, Denmark, Finland, 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 shortly or in the coming weeks.

* Using the exchange rate as of the date of the Agreed Minute (EUR1 = US$1.3049)

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