Canada Cancels 80% of Its Iraqi Debt

BAGHDAD, Iraq--(BUSINESS WIRE)--June 20, 2005--The Government of Iraq today announced that it has signed a bilateral agreement with Canada canceling U.S.$470 million of Iraqi debt, amounting to 80% of Canada's claims against Iraq.

The accord implements the agreement in principle concluded in November 2004 between Iraq and eighteen governmental creditors comprising the Paris Club. The Canadian accord is the second to be signed with Iraq's Paris Club creditors. In December of last year, the United States of America cancelled the entirety of its claims.

“Today's agreement with Canada implementing Iraq's Paris Club agreement is a welcome step in Iraq's ongoing debt management program”

Prior to this agreement, the claims of the Canadian government against Iraq totaled approximately U.S.$590 million. When fully phased in, the agreement signed today will reduce this debt stock to approximately $120 million. The debt reduction will take effect in three installments. Approximately $175 million will be cancelled immediately; a second installment of approximately $175 million of debt cancellation will automatically become effective upon the signing by Iraq of a formal stand-by arrangement with the International Monetary Fund (expected during the second half of 2005); and a final installment, equal to approximately $120 million, will automatically take effect upon completion of the stand-by arrangement. The residual debt stock will be repayable over a 23 year period with 6 years of grace on principal payments. No principal or interest will be payable during the first three years.

"Today's agreement with Canada implementing Iraq's Paris Club agreement is a welcome step in Iraq's ongoing debt management program," said Iraq's Minister of Finance Ali A. Allawi. "Iraq is grateful to Canada for its prompt and constructive approach to reaching this agreement."

The other countries comprising the Paris Club creditors of Iraq are Australia, Austria, Belgium, Denmark, Finland, France, Germany, Italy, Japan, the Republic of Korea, the Netherlands, Russia, Spain, Sweden, Switzerland and the United Kingdom. Bilateral agreements between Iraq and each of the other members of the Paris Club are expected to be signed over the next few months.

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