Nineteen countries known as the Paris Club have agreed to forgive eighty-percent of Iraq's debt owed to Paris Club members -- a total of about thirty-two billion dollars. The Paris Club includes the United States, Japan, Russia, and European countries.
Iraq's finance minister Abdel Abdul-Mahdi called the agreement "historic." "This money is needed for Iraq not only because Iraq is a ruined country, but because Iraq is an important player internationally. What will happen in Iraq will affect politically and economically the Middle East and the world," said Mr. Abdul-Mahdi.
Under the agreement, thirty percent of Iraq's debt to the Paris Club countries will be written off immediately. Another thirty percent will be canceled when Iraq agrees on a reform program with the International Monetary fund, expected in 2005. Another twenty percent of Iraq's debt to the Paris Club members will be canceled in 2008, after Iraq has completed its three-year I-M-F program.
The lifting of Iraq's debt burden will enable the country to use its oil revenues to rebuild its infrastructure. Omar Arafat is with Baghdad's Economic Administration Institute. He says economic growth will bring political stability:
"The chaos -- and I think the security issue -- is not the first issue. I think the economic issue is the first, and then the security. Poverty makes you think, let's say, not in a good way. Always, if you have someone without a job, without money in his hand to pay for the schools, to pay for his children, he'll go the other way, the way of violence. But I think the economic issue is the first issue. They have to resolve it."
President George W. Bush said the agreement to reduce Iraq's foreign debt will help revive the country's economy and encourage political reform. He said, "The Iraqi people have a historic opportunity to build a free and democratic Iraq after more than two decades of political oppression and economic devastation under the brutal regime of Saddam Hussein." Mr. Bush called on other creditor nations to provide additional debt relief for Iraq.