Foreign Minister Prince Saud al-Faisal said his country would wait until Iraq had an independent government before looking into possibly reducing the debt. The Gulf Arab states say Iraq owes them $45-$55 billion.
“This (debt) has to be discussed with a government with total sovereignty, so… this issue is now premature,” he told a news briefing broadcast live on Saudi state television in Riyadh on Tuesday.
“There is an international dialogue and we are willing to take part and discuss, but I don’t think there is scope for a serious dialogue unless there is an Iraqi government.”
Financial analysts estimate Iraq‘s debt at $108-$123 billion but that could rise to as much as $166 billion if compensation claims for Saddam Hussein’s invasion of Kuwait are included and more if Iran seeks compensation for an earlier invasion by Iraq.
The first step on cutting the debt burden is to deal with the money owed to the Gulf states, which Iraq insists was given as grants to help it in the war against Iran in the 1980s, but which the Gulf states say were loans.
“This (debt) has to be discussed with a government with total sovereignty”
Prince Saud al-Faisal, foreign minister, Saudi Arabia
Some analysts and academics say Saudi Arabia, for example, did not bother documenting the loans, while others have suggested Kuwait refused to write off the loans, but has not insisted on repayment. This could not be confirmed with creditor states.
So far, there has been little progress, according to an official from Iraq‘s occupation authorities.
Iraq is currently run by a governing council installed by the US after it ousted Saddam Hussein in April.
Occupation forces have promised to transfer power to an independent Iraqi government by July 2004 and a constitution would be written and elections held by end-2005.
Iraq owes $21 billion plus the same again in unpaid interest, to the Paris Club, which groups sovereign creditors in working out debt reduction for poor nations. The group has been given the task of getting a deal done by the end of next year.