Thursday, October 30, 2003
Two-thirds of Iraq debt should be cut: World Bank Reuters Washington, October 30
At least two-thirds of Iraq's estimated $120 billion foreign debt will need to be written off if the country is to be properly rebuilt, World Bank president James Wolfensohn said on Wednesday.
He said some $40 billion of the debt is owed to the Paris Club and at least $80 billion more due to other countries, including Gulf Arab and former Soviet states.
The Paris Club is a grouping of creditor governments who regularly meet in Paris to discuss bilateral official debt of nations around the world. It also helps them with restructuring that debt or lending money to them.
The former Yugoslavia was given a two-third debt write-off after Slobodan Milosevic was ousted and Iraq would need at least the same, Wolfensohn said.
"It will need to be at least that to give the country a real chance of getting back to equilibrium, so I think a target of something north of two-thirds will be what people will be looking at," he told the National Press Club in Washington.
Last month the Group of Seven wealthy nations said they wanted to reach a deal by the end of 2004 on Iraq's debt.
Wolfensohn said the $13 billion in aid pledged at an international donor meeting in Madrid last week for Iraq's reconstruction was a "good start" and another donors' meeting may follow.
The United States has proposed $20 billion for Iraq's reconstruction, part of a larger $87 billion that Washington wants approved by Congress for military spending in Iraq and Afghanistan.
"The meeting from a financial point of view was quite successful, the interest was considerable but there remain the overriding questions of security and the future transference of power," Wolfensohn said of the Madrid meeting.
He said Iraqi aid should be given in grants instead of loans to avoid burdening the country with more debt. It is already the world's most heavily indebted country in terms of per capita gross domestic product.
His comments come as the US Congress decides on Iraq's aid package. The White House has threatened to veto the bill for the proposed $87 billion in funding if it contains loans, saying it will slow the rebuilding of Iraq and prolong the US occupation.
Later in New York, Wolfensohn told the Council on Foreign Relations the lack of security in Iraq was a problem for delivering aid while organizations could not secure the safety of their staff.
"We as well as everyone else are apprehensive (about sending staff to Iraq)," he told the Council on Foreign Relations.
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