BlackRain
06-08-2004, 04:36 PM
Bush to press G8 for Iraq debt write-off
By Alan Beattie in London
Published: June 8 2004 20:43 | Last Updated: June 8 2004 20:43
President George W. Bush will renew pressure at the Group of Eight summit beginning on Wednesday on fellow western creditor governments to write off Iraq's debts.
US officials said on Tuesday it was evident that the "vast majority" of Iraq's estimated $120bn (€98bn) in external sovereign debt would have to be written off to enable the shattered economy to recover.
The US campaign to reduce Iraq's debt has previously raised tensions with other G8 countries, with France, Germany and Russia, who all hold Iraqi debt, expressing reservations.
Recently, Gerhard Schröder, the German chancellor, said any such write-down should be linked to the transfer of full sovereignty to an Iraqi government.
Citing a confidential International Monetary Fund analysis, a senior US official said: "In our view, I think it's clear it shows the need for the reduction of the vast majority of Iraq's debt."
The official would not be drawn on the precise number for which the US was aiming, but noted that Iraq can only generate about $20bn of oil revenue each year and as yet has little other economic capacity.
In an analysis published last year, the Paris Club - the grouping of creditor nations - estimated that Iraq owes its members around $21bn in defaulted debt. Within the G8, Japan is Iraq's largest creditor, owed $4.1bn. Russia and France hold between $3bn and $4bn in debt, with Germany owed $2.4bn and the US itself $2.2bn.
The write-down demanded by the US is likely to approach the very generous "Naples" or "Cologne" terms generally only extended by the Paris Club to very poor developing countries, not middle-income oil states.
A much larger proportion of Iraq's total external sovereign debt is owed to non-Paris Club creditors, particularly the Gulf states.
As well as increasing the pressure to write off Iraqi debt, the US will join with the UK to canvass support for increasing the relief given to developing countries eligible for the heavily-indebted poor countries (HIPC) initiative.
Development campaigners said that the move, first floated by the US at the G7 finance ministers' meeting in New York two weeks ago, would have to overcome opposition from Japan and Germany, which have been reluctant to increase the amount of relief available.
The proposal would increase by up to 100 per cent the debt relief on offer to around 40 of the world's poorest countries from the IMF and World Bank, which currently receive an average two-thirds reduction. It represents a remarkable shift in stance from the US, which until recently was opposing moves to "top up" the money on offer to countries that have already qualified for relief but since been hit by external shocks such as commodity price changes.
The move would, in effect, tear up the debt sustainability criteria, based on ratios of debt to export earnings or gross domestic product, that have determined the amount of relief available. Although the IMF and World Bank have defended such criteria, they have been attacked by campaigners as arbitrary.
By Alan Beattie in London
Published: June 8 2004 20:43 | Last Updated: June 8 2004 20:43
President George W. Bush will renew pressure at the Group of Eight summit beginning on Wednesday on fellow western creditor governments to write off Iraq's debts.
US officials said on Tuesday it was evident that the "vast majority" of Iraq's estimated $120bn (€98bn) in external sovereign debt would have to be written off to enable the shattered economy to recover.
The US campaign to reduce Iraq's debt has previously raised tensions with other G8 countries, with France, Germany and Russia, who all hold Iraqi debt, expressing reservations.
Recently, Gerhard Schröder, the German chancellor, said any such write-down should be linked to the transfer of full sovereignty to an Iraqi government.
Citing a confidential International Monetary Fund analysis, a senior US official said: "In our view, I think it's clear it shows the need for the reduction of the vast majority of Iraq's debt."
The official would not be drawn on the precise number for which the US was aiming, but noted that Iraq can only generate about $20bn of oil revenue each year and as yet has little other economic capacity.
In an analysis published last year, the Paris Club - the grouping of creditor nations - estimated that Iraq owes its members around $21bn in defaulted debt. Within the G8, Japan is Iraq's largest creditor, owed $4.1bn. Russia and France hold between $3bn and $4bn in debt, with Germany owed $2.4bn and the US itself $2.2bn.
The write-down demanded by the US is likely to approach the very generous "Naples" or "Cologne" terms generally only extended by the Paris Club to very poor developing countries, not middle-income oil states.
A much larger proportion of Iraq's total external sovereign debt is owed to non-Paris Club creditors, particularly the Gulf states.
As well as increasing the pressure to write off Iraqi debt, the US will join with the UK to canvass support for increasing the relief given to developing countries eligible for the heavily-indebted poor countries (HIPC) initiative.
Development campaigners said that the move, first floated by the US at the G7 finance ministers' meeting in New York two weeks ago, would have to overcome opposition from Japan and Germany, which have been reluctant to increase the amount of relief available.
The proposal would increase by up to 100 per cent the debt relief on offer to around 40 of the world's poorest countries from the IMF and World Bank, which currently receive an average two-thirds reduction. It represents a remarkable shift in stance from the US, which until recently was opposing moves to "top up" the money on offer to countries that have already qualified for relief but since been hit by external shocks such as commodity price changes.
The move would, in effect, tear up the debt sustainability criteria, based on ratios of debt to export earnings or gross domestic product, that have determined the amount of relief available. Although the IMF and World Bank have defended such criteria, they have been attacked by campaigners as arbitrary.