Canada cancels 80% of debt owed by Iraq

By Reshmi Basu

New York, June 20 - Canada will grant Iraq $470 million in bilateral debt relief, the Iraqi government said in a news release.

The debt reduction plan will take place in three installments. About $175 million will be cancelled immediately. This will be followed by another $175 million reduction, which will take place when Iraq signs a formal stand-by arrangement with the International Monetary Fund. This arrangement is expected during the second half of this year.

An additional $120 million will be cancelled upon the completion of the stand-by agreement.

The residual debt stock will be repayable over a 23-year period with six years of grace on principal payments. No principal or interest will be payable during the first three years, said the government in the release.

The relief will reduce Iraq's debt stock by 80% to $120 million.

"Today's agreement with Canada implementing Iraq's Paris Club agreement is a welcome step in Iraq's ongoing debt management program," said Ali A. Allawi, Iraq's minister of finance, in the statement.

The total amount of Saddam Hussein-era claims against Iraq held by both bilateral and commercial entities has been estimated at more than $125 billion, said the release.

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