PARIS, 25 April 2003 — Working out what to do about Iraq’s vast debts will first require determining exactly how much the country owes foreign governments after decades of conflict, the Paris Club of creditor countries said yesterday.
The Paris Club — a forum in which 19 creditor nations have negotiated and organized the rescheduling of debt repayments since Argentina’s debt crisis in 1956 — broached the issue of Iraqi debt during regular talks in the French capital.
“Paris Club creditors agreed that they stood ready to engage on Iraq’s debt,” said a statement issued by the secretariat of the Paris Club. It looked like there would be no quick fix, however. “They agreed, as a first step, to carry out a comprehensive assessment of Iraq’s indebtedness toward Paris Club countries,” the statement said.
“On this basis, they will review this issue in the coming months and follow closely developments on Iraq’s situation.”
Estimates of how much Iraq owes vary wildly, and the repayment of those debts or relief from them following the US-led invasion that toppled Saddam Hussein’s regime is likely to prove extremely sensitive.
Asked about Iraq’s debt, Paris Club Chairman Jean-Pierre Jouyet said: “It’s close to around $100 billion.”
“The debt due to the Club of Paris was estimated in 1990 at 26 billion euros,” he told LCI television after the meeting.
“You have to add to this the war damage — which is not dealt with by the Club of Paris but by the United Nations — and the (unpaid) interest. The oil resources, according to the estimates we have — and I’m being prudent here — should produce about $20 billion in revenue a year.”
According to Exotix, a London-based firm involved in debt trading in the financial markets, Iraq’s external debt stands at between $103.4 billion and $129.4 billion, including principal — the debt itself — and overdue interest.
The Paris Club statement said a United Nations resolution on Iraqi debts was “anticipated” but it did not elaborate on the matter in a three-paragraph statement.
The Paris Club said Iraq’s debts should also be tackled by the main multinational public lending agencies, the International Monetary Fund and the World Bank.
Jouyet said the United States was represented at the meeting, which was a regular monthly review of debt issues, and all participants agreed on the need to gather more information. He said there would be no link between any debt relief for Iraq and the distribution of reconstruction contracts.
“We agreed to work according to the usual methods of the Club — on a consensus basis with equitable treatment for all creditors, after a study by the International Monetary Fund — to see if the quantity of debt that should be annulled corresponds to what is needed for Iraq’s development,” he said.
But a governing authority and sufficient security would have to be established in Iraq before creditors could go there on fact-finding missions, he added. “We don’t know today who to talk with,” he said.
Deals with the World Bank and IMF on economic policy are traditionally prerequisites to debt relief and rescheduling deals at the Paris Club.
Paris Club permanent members are the United States, Britain, Switzerland, Sweden, Spain, Russia, Norway, the Netherlands, Japan, Italy, Ireland, Germany, France, Finland, Denmark, Canada, Belgium, Australia and Austria.