Japan ponders Iraqi debt write-off

Japan's Finance Minister Sadakazu Tanigaki says the country has yet to decide how much to write off of the debt it is owed by Iraq.

    Japan's finance minister Tanigaki (R) and US secretary John Snow

    The Nihon Keizai newspaper had reported on Friday that Japan was considering forgiving some $3bn of the $7bn it is owed, in a step expected to give a lift to negotiations on Iraq debt forgiveness among leading creditor nations.

    "Nothing has been decided at all," Tanigaki told reporters. "I'm sure there have been observations about our discussions, but nothing is set yet."

    Prime Minister Junichiro Koizumi, a strong supporter of US policy in Iraq, pledged in December to write off a "vast majority" of what Japan was owed as part of an international agreement to free Iraq of an estimated $120bn foreign-debt burden.

    The US, struggling with a worsening insurgency in Iraq, sees clearing the debt as key to reviving that country's economy.

    Yugoslavian example

    The World Bank said in January that most creditors would consider writing off two-thirds of what they were owed, a figure Japan's Foreign Ministry had said in December was a possibility as it was used in the case of the debts of the former Yugoslavia.

    Japan is owed about $4.1bn by Iraq in trade insurance and loans, and a further $3bn in penalty payments.

    It has pledged $5bn in reconstruction aid to Iraq, the most heavily indebted country in terms of its population.

    Members of the 19-nation Paris Club, an informal grouping of major creditor countries including Japan, have said no deal can be finalised until there is an internationally recognised leadership in Iraq that can sign legal papers.

    SOURCE: Reuters


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