US Push to Forgive Iraq Debt Underway


By Paul Blustein

Washington Post
April 12, 2003

Treasury Secretary John W. Snow gingerly began soliciting support from foreign economic policymakers yesterday for the reconstruction of the Iraqi economy, amid signs that he will get a favorable response on one key issue at meetings this weekend -- the need to forgive at least some of Iraq's debt.

Snow and Francis Mer, the French finance minister, met and "agreed that the international community has to be involved in reconstruction," said a Treasury official who briefed reporters. The official added that Mer "indicated that while he disagreed with the U.S. having gone into Iraq, now that that was done . . . the international community has to work together to address the issues" of how to revive the Iraqi economy.

The official described the atmosphere at the meeting as "extremely cordial," in contrast to recent conversations between French and American policymakers. That may have been because the two men avoided some difficult questions, notably whether there was a need for a central United Nations role in reconstruction. France, Germany and other countries that opposed the U.S.-led war in Iraq insist on a bigger postwar role for the U.N. than the Bush administration wants.

The discussion with Mer was the beginning of Snow's effort to enlist support on Iraqi reconstruction from his overseas counterparts at this weekend's meetings of the International Monetary Fund and the World Bank. Snow has said he hopes the gatherings, which also will bring together the finance ministers and central bankers from the Group of Eight major countries, will begin an international consensus on reconstruction issues, including debt relief for Iraq. The country's obligations are estimated at $60 billion to several hundred billions of dollars -- including war reparations to Kuwait and Iran -- which experts widely agree that Iraq cannot pay in full.

The United States, France, Germany and Russia are major creditors of Iraq. Deputy Defense Secretary Paul D. Wolfowitz said this week that one of the most important things the European countries could do to help was to forgive all or part of their claims.

Yesterday, after meeting with his French and German counterparts, Russian President Vladimir Putin said, "We are prepared to look at the question of writing off some of Iraq's debts." Forgiving the debt would have to be negotiated through international organizations, principally the "Paris Club" of creditor nations, Putin said.

Snow and Mer didn't discuss the issue of debt forgiveness, according to the Treasury official, although they did compare estimates of the size of Iraq's debt and found "a vast discrepancy" between them. They agreed that Iraq has "a lot of debt," the official said, "but there were some differences about how much is a lot."

Advocates of debt relief for poor nations, while agreeing on the need to forgive Iraq's debts, accused the Bush administration of hypocrisy because of its reluctance to support wholesale debt cancellation for other impoverished countries.

"It seems that after the U.S. prosecutes a nearly unilateral war to take over a devastated, indebted country, it suddenly sees the logic of eliminating illegitimate debts," said Njoki Njoroge Njehu, director of the Fifty Years Is Enough Network.

The United States and other creditor nations have granted substantial debt relief to the world's poorest countries. But when it comes to "middle income" countries such as Iraq, the decisions have to some extent been made on political grounds, with beneficiaries including Poland, Egypt, Jordan and Pakistan, though not others such as Nigeria.

"The basic argument is, why should the new government, and the people of Iraq, be saddled with the debts of an old dictator," said Steven Radelet, a fellow at the Center for Global Development. "It's in some ways a compelling rationale, but it's not one we universally follow."

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