Bulk of Iraqi debt to Paris Club to be forgiven

The nineteen member nations of the Paris Club have agreed to forgive 80 percent of Iraq's debt, reports the Reuters news service. The plan will reduce Iraq's total debt to the member nations to $7.8 billion, from the original $38.9 billion, over a period of four years.

The three-phase plan approved by the creditors calls for an immediate cancellation of 30 percent of Iraq's current debt, which will be followed by another 30 percent in 2005 upon approval of an economic program for the nation by the International Monetary Fund and 20 percent in 2008 after an evaluation of the effectiveness of the program.

Adel Abdul Mahdi, Iraq's Finance Minister, said that the deal was "historic". He also expressed optimism that other creditor nations, including neighbors in the Middle East as well as several Eastern European nations, may follow the West's lead in forgiving Iraqi debt.

However, Bulgaria and Romania have announced that they intend to recoup as much as possible of the debt owed them by Iraq, claiming that the inflow of cash from Iraq is essential to their respective economies. They have, however, indicated their willingness to discuss rescheduling of payments on the debt. Dimitar Tsonev, spokesman for the Bulgarian government, told the Sofia News Agency that the requests from Western leaders to reduce Iraq's debt were not the first such requests he had received. Romania has said it would like to take a flexible approach to the debt repayments, one which is in line with its economic potential.

The plan is the culmination of a trans-Atlantic struggle over the amount of Iraqi debt to be forgiven, the United States pushing for a 90 to 95 percent reduction while France argued for much less.