Japan agrees to write off 80 per cent of Iraq''s debts (06/11/05)

Japan has agreed in principle to write off 80 per cent of Iraq's $7.3 billion government debts to Tokyo, and has stated that Iraq will repay the remainder over 23 years with a six-year deferment, it was reported on Saturday.

Japan he;ping reconstruction in Iraq

The two sides are expected to conclude a formal agreement on the debt relief by the end of the year, government sources told Kyodo News Agency. The agreement paves the way for the resumption of Japanese government loans of up to $3.5 billion to help with the reconstruction in Iraq.

Financial aid will become the pillar of Japan's support for Iraqi reconstruction after the expected withdrawal of Japanese Self-Defense Forces from their reconstruction mission in Iraq next summer.

The deal came after several working-level meetings following an agreement in November last year by the Paris Club of 19 creditor nations to write off Iraq's foreign debts. As Japan is the largest creditor in the Paris Club, the bilateral agreement is likely to help expedite Iraq's negotiations with other creditor nations, the report said.

Settling the existing debts will enable Japan to proceed with arrangements to provide government loans to Iraq beginning by March 2006, the report said. Japan has suspended government loans to Iraq since the mid-1980s after war between Iraq and Iran broke out in 1980.

Iraq has already completed bilateral negotiations for debt relief with the US, Canada and some other countries. Agreement is pending with other major creditors such as Russia and France, as well as those not in the Paris Club such as Saudi Arabia.

Source: iraq Directory