Wall Street Journal
Just a few months ago, resolution of Iraq’s gigantic debt seemed pretty much insurmountable. But with almost no media fanfare, special Presidential debt envoy James A. Baker III has been making notable progress. In December, the former Secretary of State visited Iraq’s main European creditors and Japan, winning promises for major debt reduction. Now it’s the Arab world’s turn to make its contribution to a stable, free Iraq. Early this week Mr. Baker won general debt forgiveness promises from the United Arab Emirates, Qatar and Kuwait, and Thursday he reportedly got the same from the biggest Arab creditor, Saudi Arabia. . . .
Whatever the posturing going on now, the eventual number is expected to settle around 70% for all the debts, according to Richard Segal, an economist at Exotix, a London-based brokerage. The deepest write-off ever recorded by the Paris Club was the 66% extended to Serbia in 2001. But Iraq is expected to gain bigger concessions since some of its military-related debts will take a deeper discount. The net of all these guesses is that if Iraq’s debt is about $116 billion, then debt reduction would shrink it to $35 billion. Even if one factors in new loans from the World Bank and other international institutions at $5 billion, Iraq’s crucial ratio of debt-to-exports would be considered "sustainable" and encourage other, future lenders to plunge in.. . . Although there are continuing, behind-the-scenes negotiations, nothing formal can happen until Iraq has a legal government. If all goes according to U.S. plans, a new Iraqi government will take over in July, an agreement with the International Monetary Fund will follow quickly, and then the creditors will offer concrete concessions. All in all, the Baker creditors tour looks to be a victory for U.S. diplomacy, and for the future of Iraq.
Not a front-page story, and not as visually exciting as combat, but in the long run, just as important to the War on Terror. |