DAVOS, Switzerland, 23 January 2004 — Most of Iraq’s sovereign creditors are prepared to consider writing off two-thirds of its foreign debt of $120 billion, World Bank President James Wolfensohn said yesterday.
The United States sees relieving Iraq of its debt as key to reviving the war-ravaged but oil-rich country’s economy and Washington’s special envoy James Baker has visited Europe, Japan, China and the Middle East in search of ways to reduce the burden.
“I talked to him the other day. It looks as though most of the players are prepared to consider a write-off of 66 2/3 (percent) of the debt,” Wolfensohn told CNBC Television in the Swiss ski resort of Davos, where the World Economic Forum is holding its annual meeting. “He has not gotten contractual assurances but he seems reasonably confident that a Paris Club-type reconstruction is possible and that is an important first step for Iraq.”
The Paris Club includes 19 creditor states with claims of some $40 billion on Iraq. Its president, Jean-Pierre Jouyet, has said Iraq’s needs would have to be assessed by the International Monetary Fund and that official authorities must be in place to sign a debt-relief agreement. However, he has said he believes a deal can be reached by the end of 2004.
Wolfensohn said even a debt reduction of some $80 billion would not make Iraq viable and about $52 billion was needed for reconstruction.
Meanwhile, top US officials yesterday started pressing their drive for international help in rebuilding Iraq and pursuing their war on terrorism at the second day of the World Economic Forum.
US Attorney General John Ashcroft appealed for stepped-up international cooperation to combat corruption, saying it “undermines the trust on which democracy depends”.
During the morning, Nigerian President Olusegun Obasanjo, whose government suspended a fuel tax to avert a national strike, said he would not reimpose the controversial levy until a court has ruled on it.
“This is a government that believes in the rule of law,” Obasanjo told a small group of reporters on the fringe of the forum, which has attracted more that 30 leaders of government and state.
Tensions over the fuel tax, which Obasanjo called a “price modulating mechanism”, have been closely watched by oil markets since Nigeria is the fifth-biggest exporter in the Organization of Petroleum Exporting Countries.
Turning a light on the European economy, Jean-Philippe Cotis, chief economist at the Organization for Economic Cooperation and Development told a news conference that the European Central Bank has room to cut interest rates to take the sizzle out of the red hot euro, because inflation is tame.
And China also featured on the agenda, with business executives trumpeting the benefits of investing in the country, while US Secretary of Commerce Donald Evans noted that Washington’s relationship with Beijing was “very good.”
