Reuters, 23 January 2006
LONDON - Iraq will start talks with Arab Gulf states in the next few weeks to settle $40 billion of debt and complete the country's financial recovery after decades of wars and sanctions, senior Iraqi officials said on Monday.
"We are in the final leg," Finance Minister Ali Allawi told Reuters by telephone from Baghdad.
"I am positive that the talks will be a success and these countries will help us extinguish the debt, which was mostly direct transfers to the Iraqi Central Bank to finance the war with Iran."
The debt is mostly owed to Saudi Arabia and Kuwait. It is a hugely emotive issue in Iraq, which regards its war with Iran as having saved U.S.-backed Gulf regimes from an expansion of Iranian influence after the 1979 Islamic Revolution.
Mudhir Salih Kasim, the Iraqi Central Bank's chief economist, said a debt settlement with the Arab Gulf States would mostly resolve Iraq's debt problems, with progress being made on around $15 billion owed to other countries, such as the former Communist bloc.
"The Gulf Arabs basically told Iraq during the war with Iran to sacrifice your blood and we pay for it, which was ugly. This money was actually grants, not debt," Salih said.
"They are practical governments and they know it is in their interest to settle. An Iraq that recovers economically will spill benefits to the whole region," he said.
Iraqi has recently issued a $2.7 billion bond in settlement of commercial debt to multinational banks and companies that was mostly accumulated during the 1980-1988 war with Iran.
The bond qualified for international trading on Monday after having steadily risen in price on the grey market.
Commercial creditors who participated in the debt for bond exchange can now trade the bonds which carry a coupon of 5.8 percent and mature in 2028
Despite the positive market reception of the bond, Allawi said the earliest Iraq will go to the international bond market as a regular borrower is 2008.
"The bond issue is a huge success, It shows the strength of the Iraqi economy despite the bad political news," Allawi said.
"The market appetite we are seeing is great. Iraq's bond price has been rising and it is now ranked between Lebanon and Ecuador, which clearly expresses the return of Iraq to the international markets."
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Citation: Khaled Yacoub Oweis. "Iraq optimistic on Gulf Arab debt, bond succeeds," Reuters, 23 January 2006.
Original URL: http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2006-01-23T135048Z_01_L2333651_RTRIDST_0_IRAQ-FINANCE-UPDATE-1.XML
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