TOKYO, 30 December 2003 — Japan is ready to write off “the vast majority” of its Iraqi debt if other creditors do the same, Prime Minister Junichiro Koizumi told special US envoy James Baker at a meeting here yesterday.
A Foreign Ministry statement released after the hour-long meeting between the two men said Tokyo was prepared to forgive the bulk of debts owed to it by the Iraqi government provided other Paris Club creditor nations followed suit.
“Prime Minister Koizumi noted that ... Japan would be prepared to eliminate the vast majority of its Iraqi debt, if other Paris Club creditors are prepared to do so in the context of a Paris Club agreement,” the statement said.
The Iraqi government owes Tokyo around $7 billion, the most out of 19 members of the Paris Club, with the principal accounting for $4.1 billion of it. Details about the scale of the debt reduction will be decided within the Paris Club framework, a diplomat told a news briefing later. The Paris Club — named after a meeting in the French capital in 1956 between Argentina and its public creditors - aims to find solutions to payment difficulties experienced by debtor nations by rescheduling their debt.
Baker signaled Tokyo’s concession immediately after the talks ended, saying the meeting had made “very, very good progress” on reducing Iraq’s $120 billion debt burden, but gave no further details.
“Prime Minister Koizumi and Japan have taken a leadership role in the reconstruction of Iraq, something that is extraordinarily important and for which the United States is very grateful,” Baker told reporters shortly before the Japanese announcement.
Tokyo had reportedly been reluctant to forgive the debts, partly because it has already pledged $5 billion for Iraqi reconstruction.
Of the $4.1 billion principal that the Iraqi government owes Tokyo, $3.6 billion comprises trade insurance payouts and about $500 million are loans extended by the Japan Bank for International Cooperation (JBIC), according to a trade ministry official.
In addition, the Japanese government claims interests on delayed payment by Baghdad, totaling $2.9 billion, making the grant total about the $7 billion of the total debt.
The Trade Ministry has paid Japanese companies a total of $3.6 billion in export insurance claims to cover the unrecovered costs of building infrastructure in Iraq, such as hospitals and power plants, in the 1970s and 1980s.
The JBIC claims 57.5 billion yen, or $482 million, in unpaid principal and interests on five yen loans extended to Iraq to build two fertilizer plants, a power plant and 13 hospitals from 1975 to 1985.
Meanwhile, China will consider a “relatively large cut” in the debt owed to it by Iraq, Chinese Premier Wen Jiabao told Baker yesterday, according to local state media. “The Chinese government fully understands the difficulties surrounding the reconstruction of Iraq and the plight of the Iraqi people,” Wen told Baker according to the Xinhua news agency website.
“Out of humanitarian considerations, we will actively consider a relatively large cut in the debt owed to China by Iraq,” he was quoted as saying.
Baker also met with President Hu Jintao, according to the Chinese Foreign Ministry.
Hu said China would “continue, with the international community, to help reconstruction and the restoration of peace and stability in Iraq as soon as possible,” Xinhua reported.