The Iraqi debt burden has become little

February 27, 2007

The efforts of creative Financial minds, the fine Iraqi diplomacy and the support of friends had a great role in reaching the Paris Club agreement to drop 80% of Iraq's debts to the (19) States of the Club, in addition to (56) States outside the Club.

The problem of Iraq's foreign debts, was one of the most serious dilemmas faced by Iraqi economy after security at the present stage; it was not expected that the day may come when economic analysts and experts in the world would predict that Iraq, whose economy was one of the largest economies in the Arab world and after it was one of the most important petroleum exporting countries, would borrow money, request others’ help and be tied by foreign debt of more than $125 billion in addition to the compensations which were adopted after 1991 and amounted to $ 35 billion of which Iraq paid more than $ 17 billion.

The mechanism of debt reduction is 30% directly at the beginning of 2005, and this reduction program was based on emergency aid, just like the post-conflict with the IMF which is a reduced international program in terms of conditions.

There are 30% we obtained after the (Stand by) agreement was signed with the International Monetary Fund, and at the second half of 2005 we will get the remaining (20%).

In fact, when we reach the year (2008) the debts will be reduced to (80%); this means that we will pay back only (20%) of the debt, and the payment will be over (23) years beginning of the year (2011); this means we have (6) years of permit from (2005 till 2011); however, we may be able to get rid of the remaining (20%) or change them into bonds and investments by agreement with some of the creditor States, which means that we may be able to restructure the debt before (2011), especially that there are some countries which cancelled their debt on Iraq by 100% like the United States, Australia and Malta.

It can be said now that the burden of the debt has become little upon the coming years’ budget.

There are a number of options that could ease the burden of the remaining debt depending on our negotiation strength, through convincing the debtors to change their debt into contracts and investments; we could also buy the debt from the market if Iraq's financial capabilities are developed in future. Debts are bought and sold; they are sometimes sold at 10 or 20% of their nominal value or according to the buyer’s capacity to pay.

There is also another method, we have managed to follow but achieved an unsteady success, when the government converted its debts into bonds; these are all good economic issues that Iraq has not entered before; however we achieved some steps ahead in ending the subject of commercial creditors, big and small.

Because of these bold steps, Iraq occupied a status among the nations entering the international market after it has settled its commercial debt; a solution which guarantees Iraq good relations with the world and with the international economic community, as well as create a proper investment environment.