Debt write-off likely for post-war Iraq

LONDON - Iraq will pay its debts after Saddam Hussein is removed but will need a big write-off so the once-prosperous country can grow again, says an exiled former central banker who is also a senior opposition figure.

Salah al-Shaikhly is a senior member of the Iraqi National Accord opposition group exiled in London. He was a Governor of the Iraqi Central Bank in the 1970s, was the director of the Bureau of Statistics and deputy director of State Planning.

He said the country's economy had been ruined by Saddam Hussein's military adventures, which had run up huge debts.

"The debt has accumulated. In our estimate it is in the region of US$112 billion [$204 billion]," said al-Shaikhly. "It is with Governments like Russia, France and Bulgaria for the supply of arms."

He believed Russia and France were the biggest creditors with US$8 billion to US$9 billion apiece.

Figures for Iraqi debts vary. The Government puts debts at US$42.097 billion at the end of 1991, but that excludes interest and US$30 billion of loans from Gulf states, which Iraq regards as grants, paid by those states to protect them from Iran in the 1980s. Iraq and Iran fought a war between 1980 and 1988.

The World Bank estimates that with almost no debt payments made after 1990, foreign debt rose to US$126 billion by the end of 1998, of which US$47 billion was arrears on interest.

What is clear is the pattern of the increasing militarisation of the economy.

Independent economists estimate that in 1970, 19 per cent of the gross domestic product was spent on the military, rising to 23 per cent in 1980, and during 1981-88 military spending amounted to US$111 billion, or 40 per cent of that period's GDP and 154 per cent of oil revenues.

Although the future economic state of Iraq is a matter for speculation, plans are being made.

Iraqi economists have been working with the US State Department and US Treasury on an economic plan for the country, post-Saddam, which includes debt resolution.

Most analysts accept it would be impossible for Iraq's degraded oil infrastructure to deliver any meaningful improvement in standards of living to the population while at the same time paying out up to US$300 billion in reparations for the 1990 invasion of Kuwait as well as servicing its commercial debts.

What is expected is that Iraq would win generous write-offs from creditors, along the lines of those granted to former Yugoslavia which saw 66 per cent of its debts forgiven.

Among middle-income developing countries, Iraq's impoverishment is unique. Iraqi officials say per capita income has fallen to US$150 a year, less than 42c a day compared with a UN-defined poverty level of US$2 a day.

- REUTERS

Herald Feature: Iraq