AMMAN, 19 August 2005 — Romania forgave $2 billion of the $2.5 billion debt owed it by Iraq yesterday in the first such deal involving a country not a member of the Paris Club of rich creditor nations. Finance ministry officials from Romania and Iraq signed the agreement at a ceremony in Amman.
“We are the first to do this. The precedent is important for the countries not in the Paris Club to follow suit and help bring sustainability to Iraq’s long-term debt servicing,” Deputy Romanian Finance Minister Dragos Neacsu told Reuters.
“It is also important for how the rating agencies perceive Iraq and for reconstruction. It makes what Iraq is doing on the short and medium-term more credible,” Neacsu said.
Last year the 19-nation Paris Club reduced their $39 billion debt owed by Iraq by 80 percent, similar to the Romanian debt reduction.
Under the Iraq-Romania deal, debt forgiveness will take effect over three years in stages tied to an economic reform agreement between Iraq and the International Monetary Fund. Around $760 million was cancelled immediately; a similar amount is due to be cancelled at the end of 2005 and another $510 million in 2008.
